ComLite Inc. uses revaluation accounting for a class of equipment it has. The equipment was purchased on January 1, 2020 for $500,000; it has 10 years of useful life with no residual value. Valuation Data: Date Fair Value Jan 1, 2020 $500,000 Dec 31, 2020 468,000 Dec 31, 2021 380,000 Dec 31, 2022 355,000 Required: Prepare all necessary journal entries relating to equipment for 2020, 2021 and 2022
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.
ComLite Inc. uses revaluation accounting for a class of equipment it has. The equipment was purchased on January 1, 2020 for $500,000; it has 10 years of useful life with no residual value.
Valuation Data:
Date Fair Value
Jan 1, 2020 $500,000
Dec 31, 2020 468,000
Dec 31, 2021 380,000
Dec 31, 2022 355,000
Required:
Prepare all necessary
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