Company purchased equipment for $200,000 on January 1 of Year 1. The equipment has an estimated re timated useful life of 8 years. The company depreciates the equipment using the straight-line method. O any determines that the total useful life is 6 years and the estimated residual value is $2,000. ired are the entry to record depreciation expense for Year 4.
Company purchased equipment for $200,000 on January 1 of Year 1. The equipment has an estimated re timated useful life of 8 years. The company depreciates the equipment using the straight-line method. O any determines that the total useful life is 6 years and the estimated residual value is $2,000. ired are the entry to record depreciation expense for Year 4.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:Recording Entry for a Change in Estimate
Exon Company purchased equipment for $200,000 on January 1 of Year 1. The equipment has an estimated residual value of $6,000 and
an estimated useful life of 8 years. The company depreciates the equipment using the straight-line method. On January 1 of Year 4, the
company determines that the total useful life is 6 years and the estimated residual value is $2,000.
Required
Prepare the entry to record depreciation expense for Year 4.
Account Name
Date
Dec. 31, Year 4
+
+
Dr.
OO
Cr.
OO
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