Depreciation by different methods and sale of fixed assets. New machines were purchased by Nunez Co on January 1st for $114,000. The equiment was expected to have a useful life of 5 years and an estimated salvage value of 12,000. A. Determine the annual depreciation expense for each of the 5 years under the straight line method. B. The double declining method 2. Journalize the entry for the first year assuming the straightline method 3. Journalize the sale of the machine if it was sold at the end of the third year for 50,000. (Assuming the straightline method of depreciation was used.)
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. Determine the annual depreciation expense for each of the 5 years under the
B. The double declining method
2.
3. Journalize the sale of the machine if it was sold at the end of the third year for 50,000. (Assuming the straightline method of depreciation was used.)
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