The Kam Company purchased a machine on January 2, 2007 for $20,000. The machine had an expected
Question:
The Kam Company purchased a machine on January 2, 2007 for $20,000. The machine had an expected life of eight years and a residual value of $300. The double-declining-balance method of depreciation is used.
Required
1. Compute the depreciation for each year of the asset’s life.
2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the asset’s life, compute the depreciation for each year of the asset’s life.
3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight line amount exceeds the double-declining-balance amount, compute the depreciation for each year of the asset’s life.
Step by Step Answer:
For requirements 2 and 3 if a company has a policy of switching to straightline depreciation from ac...View the full answer
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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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