The company acquired a machine on January 1 at an orgional cost of $70,000. The machine's estimated residual value is $5,000, and its estimated lifetime output is $13,000 units. The actual output ofbthe machine was as follows: Year 1, 3,000 units, Year 2, 5,000 units, Year 3, 2,000 units, Year 4, 3,000 units. Compute 1) deprciation expense for each year of the machine's life and 2)book value at the end of each year of the machine's life practice
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.
The company acquired a machine on January 1 at an orgional cost of $70,000. The machine's estimated residual value is $5,000, and its estimated lifetime output is $13,000 units. The actual output ofbthe machine was as follows:
Year 1, 3,000 units, Year 2, 5,000 units, Year 3, 2,000 units, Year 4, 3,000 units.
Compute
1) deprciation expense for each year of the machine's life and
2)book value at the end of each year of the machine's life practice
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