Bradley Company purchased a machine for $34,000 on January 1, 2021. It depreciates the machine using the straight-line method over a useful life of eight years and a $2,000 residual value. On January 1, 2023, Bradley revised its estimate of residual value to $1,000 and shortened the machine's useful life to four more years. Depreciation expense for 2023 is: a.$4,000. b.$5,750. c.$6,000. d.$6,250.
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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Bradley Company purchased a machine for $34,000 on January 1, 2021. It depreciates the machine using the straight-line method over a useful life of eight years and a $2,000 residual value. On January 1, 2023, Bradley revised its estimate of residual value to $1,000 and shortened the machine's useful life to four more years.
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