At the beginning of 2020, Riverbed Company acquired equipment costing $156,400. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $15,640 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year. During 2022 (the third year of the equipment’s life), the company’s engineers reconsidered their expectations, and estimated that the equipment’s useful life would probably be 7 years (in total) instead of 6 years. The estimated salvage value was not changed at that time. However, during 2025 the estimated salvage value was reduced to $5,000.
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.
At the beginning of 2020, Riverbed Company acquired equipment costing $156,400. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $15,640 at that time. The straight-line method of
During 2022 (the third year of the equipment’s life), the company’s engineers reconsidered their expectations, and estimated that the equipment’s useful life would probably be 7 years (in total) instead of 6 years. The estimated salvage value was not changed at that time. However, during 2025 the estimated salvage value was reduced to $5,000.
Indicate how much depreciation expense should be recorded each year for this equipment, by completing the following table.
|
Year |
Depreciation
Expense |
Accumulated
Depreciation |
||
|---|---|---|---|---|
|
2020
|
$enter a dollar amount | $enter a dollar amount | ||
|
2021
|
enter a dollar amount | enter a dollar amount | ||
|
2022
|
enter a dollar amount | enter a dollar amount | ||
|
2023
|
enter a dollar amount | enter a dollar amount | ||
|
2024
|
enter a dollar amount | enter a dollar amount | ||
|
2025
|
enter a dollar amount | enter a dollar amount | ||
|
2026
|
enter a dollar amount | enter a dollar amount |
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