Asif Company acquired machinery on January 1, 2014 with an amount AED84,000. The useful life of the machinery is expected to be 4 years. The salvage value at the end of the life of the machinery is expected to be AED4,000. The machinery can produce maximum 80,000 units during its useful life. Required: - a- Show the journal entry to record depreciation expense at the end of the year 2016, and 2017 using i- Straight-line method ii- Unis-of-production method iii- Double declining balance method. b- Show the presentation of the asset in the balance sheet for the year ended on Dec 31st, 2016, and 2017 using i- Straight-line method ii- Unis-of-production method iii- Double declining balance method.
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.
Asif Company acquired machinery on January 1, 2014 with an amount AED84,000. The useful life of the machinery is expected to be 4 years. The salvage value at the end of the life of the machinery is expected to be AED4,000. The machinery can produce maximum 80,000 units during its useful life.
Required: -
a- Show the
i- Straight-line method
ii- Unis-of-production method
iii- Double declining balance method.
b- Show the presentation of the asset in the
i- Straight-line method
ii- Unis-of-production method
iii- Double declining balance method.
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