An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $14,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the sixth year of life by each of these methods: a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.
An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $14,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the sixth year of life by each of these methods: a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.
Chapter7: Deductions And Losses: Certain Business Expenses And Losses
Section: Chapter Questions
Problem 48P
Related questions
Concept explainers
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.
Topic Video
Question
An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $14,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the
sixth year of life by each of these methods:
a. The SL method.
b. The 200% DB method with switchover to SL.
c. The GDS.
d. The ADS.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you