2. A piece of equipment is purchased on March 1, 2020, and has a value of $54,000. It has an estimated useful life to the business of 6 years, and has an estimated residual value of $6,000. Assume that Straight Line Depreciation method is used: a) Calculate the Depreciation Expense for the first year of ownership of this equipment. b) Write the adjusting journal entry, dated March 31, 2020, to record the depreciation expense for the month of March. c) Show the Fixed Assets section of the Balance Sheet at March 31, 2020.
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.
2. A piece of equipment is purchased on March 1, 2020, and has a value of $54,000. It has an
estimated useful life to the business of 6 years, and has an estimated residual value of $6,000.
Assume that
a) Calculate the Depreciation Expense for the first year of ownership of this equipment.
b) Write the
expense for the month of March.
c) Show the Fixed Assets section of the
d) Write the adjusting journal entry, dated April 30, 2020, to record the depreciation
expense for the month of April 2020.
e) Show the Fixed Assets section of the Balance Sheet at April 30, 2020.
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