ABC Company has the following balances: Dec 31, 2020 $250,000 Machinery Accumulated Dep Loss on sale of machinery During 2021, ABC sold for $26,000 a machine that cost $40,000, and purchased several other items of machinery. Required Dec 31, 2021 102,000 $320,000 120,000 4,000
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.
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