by the company were a $500 machine test fee and a $500 shipping service fee. The machine can be used for 5 years with a total machine working hours of 35,000 hours. The salvage value of the machine at the end of year 5 is $1,500. At the end of year 4 the machine underwent a revision of its useful life period. The machine can still be used for 2 more years. At the end of year 5 the company decides to sell the machine for cash for $2,750. Required: calculate the cost of the machine, ca
by the company were a $500 machine test fee and a $500 shipping service fee. The machine can be used for 5 years with a total machine working hours of 35,000 hours. The salvage value of the machine at the end of year 5 is $1,500. At the end of year 4 the machine underwent a revision of its useful life period. The machine can still be used for 2 more years. At the end of year 5 the company decides to sell the machine for cash for $2,750. Required: calculate the cost of the machine, ca
Chapter1: Financial Statements And Business Decisions
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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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Purchased the machine for $15,500 with a down payment of 300. Additional costs for purchasing the machine paid for in cash by the company were a $500 machine test fee and a $500 shipping service fee. The machine can be used for 5 years with a total machine working hours of 35,000 hours. The salvage value of the machine at the end of year 5 is $1,500. At the end of year 4 the machine underwent a revision of its useful life period. The machine can still be used for 2 more years. At the end of year 5 the company decides to sell the machine for cash for $2,750.
Required: calculate the cost of the machine, calculate the depreciation for the year before and after the revision, calculate the book value of the machine for year 4, calculate the profit and loss from the sale of the machine, make journals for all these transactions.
Note: Include the method of processing in answering the questions and the excel formula
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