An entity purchased equipment on January 1, 2019 for 5,000,000. The equipment had a useful life of 5 years and residual value of 600,000. The policy is to depreciate 5-year assets using the 200% double declining method for the first 2 years and then switch to straight line. What amount should be reported as accumulated depreciation on December 31, 2021?
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.
An entity purchased equipment on January 1, 2019 for 5,000,000. The equipment had a useful life of 5 years and residual value of 600,000. The policy is to
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