Norton Construction Company purchased a cement mixer for $14,500. The mixer is expected to have a useful life of 5 years and a residual value of $1000 at the end of that time. According to engineers, the mixer has an estimated life of 7,500 hours, of which 2,625 hours were used in yr 1902. The company’s year-end is Dec 31. Required: a. Compute the depreciation expense for year 1902 assuming the cement mixer was purchased on Jan 1901 using Straight line method and Double Declining balance method. b. Do journal entry to record the depreciation expense computed in part a.
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.
Norton Construction Company purchased a cement mixer for $14,500. The mixer is
expected to have a useful life of 5 years and a residual value of $1000 at the end of that
time. According to engineers, the mixer has an estimated life of 7,500 hours, of which
2,625 hours were used in yr 1902. The company’s year-end is Dec 31.
Required:
a. Compute the
purchased on Jan 1901 using
method.
b. Do
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