Assume that XYZ catering services paid $144,000 for equipment with a16 -year life and zero expected residual value. After using the equipment for six years, the company determines that the asset will remain useful for only five more years. Record depreciation expense on the equipment for year 7 by the straight-line method. First, select the formula to calculate the company's revised depreciation expense on the equipment for year 7. Then enter the amounts and calculate the depreciation for year 7. (Enter "0" for items with a zero value.) Revised ( Book value - Residual value ) / Revised useful life remaining = depreciation
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.
Assume that XYZ catering services paid $144,000 for equipment with a16 -year life and zero expected residual value. After using the equipment for six years, the company determines that the asset will remain useful for only five more years.
Record
(Enter "0" for items with a zero value.)
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Revised
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(
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Book value
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-
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Residual value
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) /
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Revised useful life remaining
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=
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depreciation
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