A. Machinery is purchased on July 1 of the current fiscal year for $180,000. It is expected
Question:
A. Machinery is purchased on July 1 of the current fiscal year for $180,000. It is expected to have a useful life of 4 years, or 20,000 operating hours, and a residual value of $20,000. Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods:
Straight-line
B. Declining-balance at twice the straight-line rate
C. Units-of-production (used for 1,500 hours during the current year)
Step by Step Answer:
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Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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