On December 31, 2020, you are provided with the following information about the PPE of DEF Corp.: cost est. useful life depreciation method bldg 12,000,000 30 straight line machinery 5,000,000 10 SYD equipment 800,000 5 Double declining All PPE were acquired on January 1, 2018 when the business started operations, and have a residual value equal to 5% of cost. Determine the following on December 31, 2020: 1. Accumulated Depreciation of building 2. Carrying amount of building 3. Accumulated Depreciation of machinery 4. Carrying amount of machinery 5. Accumulated Depreciation of equipment 6. Carrying amount of 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 December 31, 2020, you are provided with the following information about the PPE of DEF Corp.:
| cost | est. useful life | ||
| bldg | 12,000,000 | 30 | straight line |
| machinery | 5,000,000 | 10 | SYD |
| equipment | 800,000 | 5 | Double declining |
All PPE were acquired on January 1, 2018 when the business started operations, and have
a residual value equal to 5% of cost.
Determine the following on December 31, 2020:
1.
2. Carrying amount of building
3. Accumulated Depreciation of machinery
4. Carrying amount of machinery
5. Accumulated Depreciation of equipment
6. Carrying amount of equipment
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