Question #1: How much depreciation expense should be recorded in 20X3 (the third year of the asset's life)? Answer: $Answer. Question #2: What should be the balance in the "Accumulated Depreciation" account at the end of 20X3, after all year-end journal entries? Answer: $Answer. Question #3: What should be the book value of the machine at the end of 20X3, after all year-end journal entries?
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.
Buddy Inc., a calendar year-end company, purchased a machine on 1/1/X1 with the following attributes:
| Cost | $ 80,000 |
| Salvage Value | $ 10,000 |
| Useful life | 4 years |
Assuming that Buddy uses the
Question #1: How much depreciation expense should be recorded in 20X3 (the third year of the asset's life)? Answer: $Answer.
Question #2: What should be the balance in the "
Question #3: What should be the book value of the machine at the end of 20X3, after all year-end journal entries? Answer: $Answer
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