A Machine was purchased on 1st January 2004 at a cost, of $50,000 and the cost of installation $8,000 his expected that its total working life will be 100,000 hours. The scrap value may be Rs 3,000. During the year 2004, the machine worked for 1,200 hours and in 2005 for 1,350 hours. Calculate the book value after 2005. Show your solutions
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 was purchased on 1st January 2004 at a cost, of $50,000 and the cost of installation $8,000 his expected that its total working life will be 100,000 hours. The scrap value may be Rs 3,000. During the year 2004, the machine worked for 1,200 hours and in 2005 for 1,350 hours. Calculate the book value after 2005.
Show your solutions.
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