Al-Maha Corp. purchased a machine on January 1, 2016 at a cost of OMR25,000. The machine was depreciated using the straight-line method over an estimated eight-year life with an estimated residual value of OMR5,000. On January 1, 2019 the company decided to make the following changes: i.To change to the double-declining method ii.Estimated useful life was changed to a total of 12 years iii.The estimated residual value was changed to OMR2,000 Required: Calculate the depreciation for 2019
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.
Al-Maha Corp. purchased a machine on January 1, 2016 at a cost of OMR25,000. The machine was
i.To change to the double-declining method
ii.Estimated useful life was changed to a total of 12 years
iii.The estimated residual value was changed to OMR2,000
Required: Calculate the depreciation for 2019
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