Holt Company purchased a computer for $8,000 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2018, the estimates are revised. Holt now feels the computer will be used until December 31, 2019, when it can be sold for $500. Compute the 2018 depreciation.
Depreciation for 2018 = $2,350
Depreciation can be stated as the decline in the value of an asset over a useful period. All assets depreciate over time, except land, whose value increases with the passage of time. Among the various methods of depreciation, straight-line depreciation is considered to be the simplest and error-free method.
Calculation of annual depreciation
Calculating book value on January 1, 2018
Calculating depreciation expense for 2018
(Depreciation Computations—Four Methods) Robert Parish Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $117,900. The company estimated that the machine would have a salvage value of $12,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 21,000 hours. Year-end is December 31.
Compute the depreciation expense under the following methods. Each of the following should be considered unrelated.
On January 1, 2016, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000. Locke estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,000 units per year over the remaining useful life of the equipment.
The following depreciation methods may be used:
Use the MACRS tables for computing depreciation.
A building that was purchased on December 31, 2003, for $2,500,000 was originally estimated to have a life of 50 years with no salvage value at the end of that time. Depreciation has been recorded through 2017. During 2018, an examination of the building by an engineering firm discloses that its estimated useful life is 15 years after 2017. What should be the amount of depreciation for 2018?
(Depreciation—SYD, Act., SL, and DDB) The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2017.
Sum-of-the year digits
Accum. depr. through 2017
*In the year an asset is purchased, Eshkol, Inc. does not record any depreciation expense on the asset. In the year an asset is retired or traded in, Eshkol, Inc. takes a full year’s depreciation on the asset.
The following transactions occurred during 2018.
Machinery (Machine A) 13,000
b. On December 31, it was determined that Machine B had been used 2,100 hours during 2018.
c. On December 31, before computing depreciation expense on Machine C, the management of Eshkol, Inc. decided the useful life remaining from January 1, 2018, was 10 years.
d. On December 31, it was discovered that a machine purchased in 2017 had been expensed completely in that year. This machine cost $28,000 and has a useful life of 10 years and no salvage value. Management has decided to use the double-declining-balance method for this machine, which can be referred to as “Machine E.”
Prepare the necessary correcting entries for the year 2018. Record the appropriate depreciation expense on the above-mentioned machines. No entry is necessary for Machine D.
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