Crane Company purchased a machine on January 1, 2022 for $885000. At the date of acquisition, the machine had an estimated useful life of 6 years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2025, Crane determined, as a result of additional information, that the machine had an estimated useful life of 8 years from the date of acquisition with no salvage. An accounting change was made in 2025 to reflect this additional information. What amount of depreciation expense on this machine should be charged in Crane's income statement for the year ended December 31, 2025? O $221250 O $177000 EEE O $110625 $88500
Crane Company purchased a machine on January 1, 2022 for $885000. At the date of acquisition, the machine had an estimated useful life of 6 years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2025, Crane determined, as a result of additional information, that the machine had an estimated useful life of 8 years from the date of acquisition with no salvage. An accounting change was made in 2025 to reflect this additional information. What amount of depreciation expense on this machine should be charged in Crane's income statement for the year ended December 31, 2025? O $221250 O $177000 EEE O $110625 $88500
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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Transcribed Image Text:Crane Company purchased a machine on January 1, 2022 for $885000. At the date of acquisition, the machine had an estimated
useful life of 6 years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2025, Crane determined,
as a result of additional information, that the machine had an estimated useful life of 8 years from the date of acquisition with no
salvage. An accounting change was made in 2025 to reflect this additional information.
What amount of depreciation expense on this machine should be charged in Crane's income statement for the year ended December
31, 2025?
$221250
$177000
$110625
O $88500
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