Depreciation methods and depreciable amount
On Jan 31, 01, entity E acquires a machine for CU 15 that is available for use on the same day. Payment is effected in cash on the same day. The residual value of the machine is CU 3.
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Determine the depreciation expense in E"s financial statements as on Dec 31 for the years 01–03. Depreciation is calculated (a) according to the straight-line method and (b) according to the units of production method. The entries only have to be illustrated for version (a).
Assume for version (a) that the machine"s useful life is three years and for version (b) that the expected and actual use of the machine in the years 01–03 is 12,000 hours (= 3,000 hours in 01 + 5,000 hours in 02 + 4,000 hours in 03).