# 22. Lost World Company inally estimated that the E11.15 (LO 1,2) (Depreciation for Fractional Periods) On March 10,...

22. Lost World Company inally estimated that the E11.15 (LO 1,2) (Depreciation for Fractional Periods) On March 10, 2022, Lost World sells equipment that it purchased for \$192,000 on August 20, 2015. It was originally estimated equipment would have a life of 12 years and a salvage value of \$16,800 at the end of that time preciation has been computed on that basis. The company uses the straight-line method of depreciation Instructions a. Compute the depreciation charge on this equipment for 2015, for 2022, and the total charge for the period from 2016 to 2021, inclusive, under each of the six following assumptions with respect to partial periods. 1. Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base and record depreciation through March 9, 2022.) 2. Depreciation is computed for the full year on the January 1 balance in the asset account 3. Depreciation is computed for the full year on the December 31 balance in the asset accoun 4. Depreciation for one-half year is charged on plant assets acquired or disposed of our 5. Depreciation is computed on additions from the beginning of the month following a and on disposals to the beginning of the month following disposal. 6. Depreciation is computed for a full period on all assets in use for over one-half year preciation is charged on assets in use for less than one-half year. (Use 365 days for b. Briefly evaluate the methods above, considering them from the point of view of theory as well as simplicity of application. F11 16 following acquisition er one-half year, and no de e 365 days for base.) of view of basic accounting

 Depreciation Per Year  = (\$192,000 - \$16,800)/12 \$ 14,600.00 2015 2016- 2021 2022 Total 1) Depreciation = \$14,600/365 x 133 days(Aug 20 to Dec 31) \$   5,320.00 \$ 87,600.00 \$   2,720.00 \$       95,640.00 Dep. 2022 = \$14,600/365 x 68 days(Dec 31 to Mar 9) 2) 0 \$ 87,600.00 \$ 14,600.00 \$     102,200.00 3) \$ 14,600.00 \$ 87,600.00 0 \$     102,200.00 4) \$   7,300.00 \$ 87,600.00 \$   7,300.00 \$     102,200.00 5) 2015 = 4/12 x 14600 ; 2022 = 3/12 x 14600 \$   4,866.67 \$ 87,600.00 \$   3,650.00 \$       96,116.67 6) 0 \$ 87,600.00 0 \$       87,600.00 b) The most accurate distribution of cost is given by methods 1 and 5 if it is assumed that straight-line depreciation is satisfactory. Reasonable accuracy is normally given by 2, 3, or 4. The simplest of the applications are 6, 2, 3, 4, 5, and 1, in about that order. Meth ods 2, 3, and 4 combine reasonable accuracy with simplicity of application.

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