On Feb 15 ABC Company purchased a new machine with an estimated useful life of 5 years. Cost of the machine was $60000, with a residual value of $5000. Required: Compute the amount of depreciation by preparing the depreciation schedule under: Straight-line method Double declining method
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 Feb 15 ABC Company purchased a new machine with an estimated useful life of 5 years. Cost of the machine was $60000, with a residual value of $5000.
Required:
Compute the amount of
- Straight-line method
- Double declining method
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