On July 1, 2020, Whispering Winds Company purchased for $6,300,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $262,500. Depreciation is taken for the portion of the year the asset is used. Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the 1. sum-of-the-years'-digits method. 2. double-declining balance method
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.
On July 1, 2020, Whispering Winds Company purchased for $6,300,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $262,500.
Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the
| 1. | sum-of-the-years'-digits method. | |
| 2. | double-declining balance method. |
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