The company has the following data of the non-current assets. Asset Original Cost Residual Value Estimated Life Depreciation Method Machine A (purchased on 1 Jan. 2017 $32,000 $4,000 5 years Straight-line Machine B (purchased on 1 Jan. 2021) 36,000 3,500 5 years Double-declining balance Machine C (purchased on 1 Jan. 2019) 52,000 4,000 5 years Double-declining balance Machine D (purchased on 1 Jan. 2018) 360,000 96,000 5 years Unit-of-Production method Additional information: For machinery D estimated units produced is 120,000 unit, Machine D is used to produce 40,000, 25,000, 35,000 units in the first, second, and third year respectively, it is used to produce 5,000 units during 1 Jan 21 to 31 Mar 21 1 Apr. 21 the company sold Machine A (purchased on 1 Jan. 2017) for $12,000 cash, Machine B (purchased on 1 Jan. 2021) for $ 25,000, and Machine C (purchased on 1 Jan. 2019) for $24,000 And 1 Apr. 21 Machine D (purchased on 1 Jan. 2018) for $50,000 have retired Please do journal entry to depreciate machine A, B, C, D as at 31 Mar 21, note the journal entry for the selling and retirement of asset transaction in 1 Apr. 21, and show T-account of each related account since 1 Jan 21 to 30 Apr.21
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 has the following data of the non-current assets.
|
Asset |
Original Cost |
Residual Value |
Estimated Life |
|
|
Machine A (purchased on 1 Jan. 2017 |
$32,000 |
$4,000 |
5 years |
Straight-line |
|
Machine B (purchased on 1 Jan. 2021) |
36,000 |
3,500 |
5 years |
Double-declining balance |
|
Machine C (purchased on 1 Jan. 2019) |
52,000 |
4,000 |
5 years |
Double-declining balance |
|
Machine D (purchased on 1 Jan. 2018) |
360,000 |
96,000 |
5 years |
|
Additional information: For machinery D estimated units produced is 120,000 unit, Machine D is used to produce 40,000, 25,000, 35,000 units in the first, second, and third year respectively, it is used to produce 5,000 units during 1 Jan 21 to 31 Mar 21
1 Apr. 21 the company sold Machine A (purchased on 1 Jan. 2017) for $12,000 cash, Machine B (purchased on 1 Jan. 2021) for $ 25,000, and Machine C (purchased on 1 Jan. 2019) for $24,000
And 1 Apr. 21 Machine D (purchased on 1 Jan. 2018) for $50,000 have retired
Please do
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