B purchased a machine for $120,000 on 1 October 20X1. The estimated useful life is 4 years with a residual value of $4,000. B uses the straight-line method for depreciation and charges depreciation on a monthly basis. What is the charge for depreciation for the year ended 31 December 20X1? A $7,250 B $7,500 C $29,000 D $30,000
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.
B purchased a machine for $120,000 on 1 October 20X1. The estimated useful life is 4 years with a residual
value of $4,000. B uses the straight-line method for
basis.
What is the charge for depreciation for the year ended 31 December 20X1?
A $7,250
B $7,500
C $29,000
D $30,000
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