E11-15B (Depreciation for Fractional Periods) On June 15, 2016, Simply Company sells equipment that it purchased for $300,000 on April 10, 2010. It was originally estimated that the equipment would have a life of 10 years and a salvage value of $25,000 at the end of that time, and depreciation has been computed on that basis. The company uses the straight-line method of depreciation.
(a) Compute the depreciation charge on this equipment for 2010, for 2016, and the total charge for the period from 2011 to 2015, inclusive, under each of the six following assumptions with respect to
(1) Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for the base.)
(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 account.
(4) Depreciation for one-half year is charged on plant assets acquired or disposed of during the year.
(6) Depreciation is computed for a full period on all assets in use for over one-half year, and no depreciation is charged on assets in use for less than one-half year.
(b) Briefly evaluate the methods above, considering them from the point of view of basic accounting
theory as well as simplicity of application.
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