A piece of Machine acquired on January 03, 2001 at cost of RS. 25,000, has an estimated useful life of five years and an estimated residual value of RS. 5,000. What was the annual amount of depreciation for the years 2001, 2002 and, 2003, using the straight-line method of depreciation? What was the book value of equipment on January 01, 2004? Assuming that equipment was sold on January 02, 2004, for RS/ 10,500, journalize the entry to record the sale.
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 piece of Machine acquired on January 03, 2001 at cost of RS. 25,000, has an estimated useful life of five years and an estimated residual value of RS. 5,000.
- What was the annual amount of
depreciation for the years 2001, 2002 and, 2003, using the straight-line method of depreciation? - What was the book value of equipment on January 01, 2004?
Assuming that equipment was sold on January 02, 2004, for RS/ 10,500,
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