On March 10, 2019, Lost World Company sells equipment that itpurchased for $192,000 on August 20, 2012. It was originallyestimated that the equipment would have a life of 12 years and asalvage value of $16,800 at the end of that time, and depreciationhas been computed on that basis. The company uses the straightlinemethod of depreciation. Following are the assumptions with respectto partial periods: (1) Depreciation is computed for the exactperiod of time during which the asset is owned. (Use 365 days forthe base and record depreciation through March 9, 2019.) (2)Depreciation is computed for the full year on the January 1 balancein the asset account. (3) Depreciation is computed for the fullyear on the December 31 balance in the asset account. (4)Depreciation for one-half year is charged on plant assets acquiredor disposed of during the year. (5) Depreciation is computed onadditions from the beginning of the month following acquisition andon disposals to the beginning of the month following disposal. (6)Depreciation is computed for a full period on all assets in use forover one-half year, and no depreciation is charged on assets in usefor less than one-half year. (Use 365 days for base.) Brieflyevaluate the methods above, considering them from the point of viewof basic accounting theory as well as simplicity ofapplication.
On March 10, 2019, Lost World Company sells equipment that itpurchased for $192,000 on August 20, 2012. It was originallyestimated that the equipment would have a life of 12 years and asalvage value of $16,800 at the end of that time, and depreciationhas been computed on that basis. The company uses the straightlinemethod of depreciation. Following are the assumptions with respectto partial periods: (1) Depreciation is computed for the exactperiod of time during which the asset is owned. (Use 365 days forthe base and record depreciation through March 9, 2019.) (2)Depreciation is computed for the full year on the January 1 balancein the asset account. (3) Depreciation is computed for the fullyear on the December 31 balance in the asset account. (4)Depreciation for one-half year is charged on plant assets acquiredor disposed of during the year. (5) Depreciation is computed onadditions from the beginning of the month following acquisition andon disposals to the beginning of the month following disposal. (6)Depreciation is computed for a full period on all assets in use forover one-half year, and no depreciation is charged on assets in usefor less than one-half year. (Use 365 days for base.) Brieflyevaluate the methods above, considering them from the point of viewof basic accounting theory as well as simplicity ofapplication.
Related questions
On March 10, 2019, Ivanhoe Company sells equipment that itpurchased for $230,400 on August 20, 2012. It was originallyestimated that the equipment would have a life of 12 years and asalvage value of $20,160 at the end of that time, and depreciationhas been computed on that basis. The company uses the straight-linemethod of depreciation. Compute the depreciation charge on thisequipment for 2012, for 2019, and the total charge for the periodfrom 2013 to 2018, inclusive, under each of the followingassumptions with respect to partial periods.
| 1. Depreciation is computed for the exact period of time duringwhich the asset is owned. (Use 365 days for the base and recorddepreciation through March 9, 2019.) 5. Depreciation is computed on additions from the beginning ofthe month following acquisition and on disposals to the beginningof the month following disposal. |
(Round depreciation per day to 2 decimal places, e.g. 15.64 andfinal answers to 0 decimal places, e.g. 45,892.)
âNeeds answer as ESSAY!
| Exercise 11-15 (Essay) On March 10, 2019, Lost World Company sells equipment that it purchased for $192,000 on August 20, 2012. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $16,800 at the end of that time, and depreciation has been computed on that basis. The company uses the straightline method of depreciation.Following are the assumptions with respect to partial periods:
Briefly evaluate the methods above, considering them from the point of view of basic accounting theory as well as simplicity of application. |
