BE 203 Yakima Co. purchased equipment on May 1, 2016 for $7,704. The company expects to use the equipment for 6 years. It has no salvage value. 1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1,284)? 2. What is the book value of the equipment at May 31, 2016?
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.
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