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Basic information relating to a new machine purchased by Downing Company is presented in E9-5. Instructions Using

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Basic information relating to a new machine purchased by Downing Company is presented in E9-5.

Instructions
Using the facts presented in E9-5, compute depreciation using the following methods in the year indicated.
(a) Declining-balance using double the straight-line rate for 2010 and 2011.
(b) Units-of-activity for 2010, assuming machine usage was 2,900 hours.

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a Decliningbalance method 2010 depreciation 90000 X 25 ...View the full answer


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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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