Alteran Corporation purchased office equipment for $1.5 million in 2015. The equipment is being depreciatedover a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $300,000. Atthe beginning of 2018, Alteran decided to change to the straight-line depreciation method for this equipment.Required:Prepare the journal entry to record depreciation for 2018
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.
Alteran Corporation purchased office equipment for $1.5 million in 2015. The equipment is being depreciated
over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $300,000. At
the beginning of 2018, Alteran decided to change to the
Required:
Prepare the
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