A manufacturing company purchased equipment five years ago on January 1 for $450,000. As of January 1 of the current year, depreciation of $202,500 had been recorded on this asset. Depreciation expense for the current year is $22,500. After the adjustments are recorded and posted at December 31 of the current year, what are the balances for the equipment and for accumulated depreciation? equipment: $225,000; accumulated depreciation: $225,000 equipment: $225,000; accumulated depreciation: $22,500 equipment: $450,000; accumulated depreciation: $225,000 equipment: $450,000; accumulated depreciation: $0
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.
A manufacturing company purchased equipment five years ago on January 1 for $450,000. As of January 1 of the current year,
equipment: $225,000; accumulated depreciation: $225,000
equipment: $225,000; accumulated depreciation: $22,500
equipment: $450,000; accumulated depreciation: $225,000
equipment: $450,000; accumulated depreciation: $0
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