Dell Technologies Inc. at the beginning 2019 purchased servers at a cost of $750,000. At that time they anticipated that the servers would have a useful life of 5 years and a residual value of $20,000. They used the Sum of Year digits for the first 2 years and in 2021 they adjusted the useful life to 4 years and switched to the Straight Line method. Prepare all necessary journal entries
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.
Dell Technologies Inc. at the beginning 2019 purchased servers at a cost of $750,000. At that time they anticipated that the servers would have a useful life of 5 years and a residual value of $20,000. They used the Sum of Year digits for the first 2 years and in 2021 they adjusted the useful life to 4 years and switched to the
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