ABC Ltd purchases a factory machine at $210,000 on January 1, 2018. ABC Ltd expects the machine to have a salvage value of $30,000 at the end of its 5-year useful life. Requirement: Prepare depreciation schedules for the declining balance using double the straight-line rate.
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.
I) ABC Ltd purchases a factory machine at $210,000 on January 1, 2018. ABC Ltd expects the machine to have a salvage value of $30,000 at the end of its 5-year useful life. Requirement: Prepare
ii) ABC Company has the following inventory, purchases, and sales data for August 2019.
Inventory: August 1 200 units @ 4.00
Purchases: August 10 500 units @ 4.30
August 18 400 units @ 4.75
August 27 300 units @ 5.00
Sales: August 15 700 units
August 25 300 units
August 29 400 units
Requirement: Under a perpetual inventory system, determine the cost of inventory on hand on August 31 and the cost of goods sold for August under the Average-cost method.
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