A machine that costs $40,000 and had been depreciated $30,000 was traded in on a new machine of like purpose having an estimated 10-year life and priced at $50,000. If a $13,000 trade-in allowance was received on the old machine, at what amount should the machine be recorded in the accounts?
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.
A machine that costs $40,000 and had been
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