On January 2, 2013, the Jackson Company purchased equipment to be used in its manufacturing process. The
Question:
On January 2, 2013, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows:
Purchase price ............$154,000
Freight charges ........... 2,000
Installation charges .......... 4,000
Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life.
Required:
1. Calculate depreciation for each year of the asset’s eight-year life.
2. Discuss the accounting treatment of the depreciation on the equipment.
Step by Step Answer:
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson