Pedroni Oil Company purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $4,500. The equipment was used for 7,600 hours during year 1, 6,000 hours in year 2, and 4,400 hours in year 3. Determine the amount of depreciation expense for the three years ending December 31, by the Straight line method, The units of activity method, and the double declining balance method. Finally determine the total amount of depreciation expense for the three years by each 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.
Pedroni Oil Company purchased packaging equipment on January 8 for $72,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $4,500. The equipment was used for 7,600 hours during year 1, 6,000 hours in year 2, and 4,400 hours in year 3.
Determine the amount of depreciation expense for the three years ending December 31, by the
3. On July 31, 2019 the balances of the accounts appearing in the ledger of Pedroni Interiors company a furniture wholesales, are as follows.
Accumulated Depreciation – Building $365,000 Ray Zorzi – Capital $530,000
Administrative Expenses 440,000 Ray Zorzi – Drawing 15,000
Building 810,000 Sales 1,437,000
Cash 78,000 Sales tax Payable 4,500
Cost of Merchandise Sold 775,000 Selling Expense 160,000
Interest Expense 6,000 Store Supplies 16,000
Merchandise Inventory 115,000 Store Supplies Expense 21,500
Notes Payable 100,000
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