E10-7 Calculating depreciation amounts by three methods [10–15 min] Mama's Fried Chicken bought equipment on 2 January 2016 for $39000. The equipment was expected to remain in service for four years and to perform 11000 fry jobs. At the end of the equipment's useful life, Mama's estimates that its residual value will be $6000. The equipment performed 1 100 jobs in the first year, 3 300 in the second year, 4 400 in the third year and 2 200 in the fourth year. Requirements 1 Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under reducing-balance depreciation using 2 times the straight-line rate, Mama's switched to the straight-line method. Show your calculations. Note: Three depreciation schedules must be prepared. 2 Which method tracks the wear and tear on the equipment most closely?
E10-7 Calculating depreciation amounts by three methods [10–15 min] Mama's Fried Chicken bought equipment on 2 January 2016 for $39000. The equipment was expected to remain in service for four years and to perform 11000 fry jobs. At the end of the equipment's useful life, Mama's estimates that its residual value will be $6000. The equipment performed 1 100 jobs in the first year, 3 300 in the second year, 4 400 in the third year and 2 200 in the fourth year. Requirements 1 Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under reducing-balance depreciation using 2 times the straight-line rate, Mama's switched to the straight-line method. Show your calculations. Note: Three depreciation schedules must be prepared. 2 Which method tracks the wear and tear on the equipment most closely?
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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.
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![E10-7 Calculating depreciation amounts by three methods [10–15 min]
Mama's Fried Chicken bought equipment on 2 January 2016 for $39000. The equipment was
expected to remain in service for four years and to perform 11000 fry jobs. At the end of the
equipment's useful life, Mama's estimates that its residual value will be $6000. The equipment
performed 1100 jobs in the first year, 3 300 in the second year, 4 400 in the third year and
2 200 in the fourth year.
Requirements
1 Prepare a schedule of depreciation expense per year for the equipment under the
three depreciation methods. After two years under reducing-balance depreciation using
2 times the straight-line rate, Mama's switched to the straight-line method. Show your
calculations.
Note: Three depreciation schedules must be prepared.
2 Which method tracks the wear and tear on the equipment most closely?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9d6686f0-24e3-43de-bc21-a827730605bb%2F4431b8aa-852f-4709-829a-8e8186263147%2F8hhs116_processed.png&w=3840&q=75)
Transcribed Image Text:E10-7 Calculating depreciation amounts by three methods [10–15 min]
Mama's Fried Chicken bought equipment on 2 January 2016 for $39000. The equipment was
expected to remain in service for four years and to perform 11000 fry jobs. At the end of the
equipment's useful life, Mama's estimates that its residual value will be $6000. The equipment
performed 1100 jobs in the first year, 3 300 in the second year, 4 400 in the third year and
2 200 in the fourth year.
Requirements
1 Prepare a schedule of depreciation expense per year for the equipment under the
three depreciation methods. After two years under reducing-balance depreciation using
2 times the straight-line rate, Mama's switched to the straight-line method. Show your
calculations.
Note: Three depreciation schedules must be prepared.
2 Which method tracks the wear and tear on the equipment most closely?
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