Pharoah Ltd. purchased a new machine on April 4, 2017, at a cost of $164,000. The company estimated that the machine would have a residual value of $14,000. The machine is expected to be used for 10,000 working hours during its four-year life. Actual machine usage was 1,600 hours in 2017: 2.100 hours in 2018; 2,500 hours in 2019: 2,000 hours in 2020; and 1,800 hours in 2021. Pharoah has a December 31 year end. (a) Your answer is partially correct. Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, eg. 2.75 and final answers to 0 decimal places, e.g. 5,275.) (1) Straight-line for 2017 through to 2021. SUP
Pharoah Ltd. purchased a new machine on April 4, 2017, at a cost of $164,000. The company estimated that the machine would have a residual value of $14,000. The machine is expected to be used for 10,000 working hours during its four-year life. Actual machine usage was 1,600 hours in 2017: 2.100 hours in 2018; 2,500 hours in 2019: 2,000 hours in 2020; and 1,800 hours in 2021. Pharoah has a December 31 year end. (a) Your answer is partially correct. Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, eg. 2.75 and final answers to 0 decimal places, e.g. 5,275.) (1) Straight-line for 2017 through to 2021. SUP
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
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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.
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