Honesty Manufacturing purchased a machine on 1 July, 2017. The following financial information has been collected to calculate the depreciation at 30 June 2019: Cost $58,500 Expected salvage value $1,000 Estimated useful life in years 5 Estimated useful life in hours 200,000 Hours used in 2020 is: 48,000 Required: Calculate the depreciation expense of the machine for the year ended 30 June 2019 using: a) Straight-line method b) Unit of activity method c) Declining balance method using double straight-line rate
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.
Honesty Manufacturing purchased a machine on 1 July, 2017. The following financial information has been collected to calculate the
|
Cost |
$58,500 |
|
Expected salvage value |
$1,000 |
|
Estimated useful life in years |
5 |
|
Estimated useful life in hours |
200,000 |
|
Hours used in 2020 is: |
48,000 |
Required:
Calculate the depreciation expense of the machine for the year ended 30 June 2019 using:
a) Straight-line method
b) Unit of activity method
c) Declining balance method using double straight-line rate
Step by step
Solved in 2 steps
