1. Change in estimated useful life and residual value. Company XYZ purchases equipment on 1 January 20x6 for $ 42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year of acquisition. The equipment has an estimated residual value of $8,000.00 and an estimated useful life of 4 years. In 20x7, the company decides that the machine really has an origional total life of 5 years and a residual value of $ 7,000.00 How much is the depreciation expense for 20x7? Solution:
1. Change in estimated useful life and residual value. Company XYZ purchases equipment on 1 January 20x6 for $ 42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year of acquisition. The equipment has an estimated residual value of $8,000.00 and an estimated useful life of 4 years. In 20x7, the company decides that the machine really has an origional total life of 5 years and a residual value of $ 7,000.00 How much is the depreciation expense for 20x7? Solution:
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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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.
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