On April 1, 2005, a company disposed of equipment for $1,200 cash that had cost $39,500 on January 1, 2001. The equipment had a salvage value of $5,000 and a useful life of 10 years. The double-declining-balance depreciation method was used. Determine what the value of accumulated depreciation was at the time of sale. Prepare journal entries to record depreciation for each year up to the date of disposal of the equipment. Prepare a journal entry to record the disposal of the equipment.
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.
On April 1, 2005, a company disposed of equipment for $1,200 cash that had cost $39,500 on January 1, 2001. The equipment had a salvage value of $5,000 and a useful life of 10 years. The double-declining-balance
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