ABC Corp. has been depreciating its production equipment on straight-line basis over 10 years, taking a full year's depreciation in the year of acquisition and assuming no residual value at the end of the equipment's life. The company had invested $2,000,000 in the equipment at the beginning of 2012. At the beginning of 2014, the company decided to adjust the equipment's total useful life from 10 years up to 12 years, but with an estimated residual value of amounting to 10% of the equipment's original cost, rather than zero. Required: Determine the amount of depreciation expense to be shown for 2013, 2014 and 2015?
ABC Corp. has been depreciating its production equipment on straight-line basis over 10 years, taking a full year's depreciation in the year of acquisition and assuming no residual value at the end of the equipment's life. The company had invested $2,000,000 in the equipment at the beginning of 2012. At the beginning of 2014, the company decided to adjust the equipment's total useful life from 10 years up to 12 years, but with an estimated residual value of amounting to 10% of the equipment's original cost, rather than zero. Required: Determine the amount of depreciation expense to be shown for 2013, 2014 and 2015?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:ABC Corp. has been depreciating its production
equipment on straight-line basis over 10 years,
taking a full year's depreciation in the year of
acquisition and assuming no residual value at
the end of the equipment's life. The company
had invested $2,000,000 in the equipment at
the beginning of 2012. At the beginning of 2014,
the company decided to adjust the equipment's
total useful life from 10 years up to 12 years, but
with an estimated residual value of amounting
to 10% of the equipment's original cost, rather
than zero.
Required: Determine the amount of
depreciation expense to be shown for 2013,
2014 and 2015?
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