Calculate the amount of depreciation to report during the year ended December 31 for equipmentthat was purchased at a cost of $43,000 on October 1. The equipment has an estimated residualvalue of $3,000 and an estimated useful life of five years or 20,000 hours. Assume the equipmentwas used for 1,000 hours from October 1 to December 31 and the company uses ( a ) straight-line,( b ) double-declining-balance, or ( c ) units-of-production depreciation.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Calculate the amount of depreciation to report during the year ended December 31 for equipment
that was purchased at a cost of $43,000 on October 1. The equipment has an estimated residual
value of $3,000 and an estimated useful life of five years or 20,000 hours. Assume the equipment
was used for 1,000 hours from October 1 to December 31 and the company uses ( a ) straight-line,
( b ) double-declining-balance, or ( c ) units-of-production depreciation.
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