On January 1, 2017 Baker purchase a new stamping machine for its plant. This new piece of equipment cost $120,000 and was recorded in Baker's accounting system with a $120,000 debit to the Equipment account and a $120,000 credit to the cash account. Baker estimates that the stamping machine will last 5 years and will have no value at the end of those 5 years. At the end of January, February, March, April and May, Baker made the depreciation adjusting entries. Select the June 30, 2017 adjusting entry Baker should make for June's depreciation:
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 January 1, 2017 Baker purchase a new stamping machine for its plant. This new piece of equipment cost $120,000 and was recorded in Baker's accounting system with a $120,000 debit to the Equipment account and a $120,000 credit to the cash account. Baker estimates that the stamping machine will last 5 years and will have no value at the end of those 5 years. At the end of January, February, March, April and May, Baker made the
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