E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight- Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.) During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $27,000. On the date of delivery. January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $1,400 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,300. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,000. E8-4 Part 5 5. Determine the net book value of the machine at the end of Year 2. Note: Amounts to be deducted should be indicated by a minus sign. Net book value of machine at end of Year 2 $ Equipment (cost) Accumulated depreciation Net book value at end of year 2 30,700 meng 30,700
E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight- Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.) During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $27,000. On the date of delivery. January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $1,400 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,300. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,000. E8-4 Part 5 5. Determine the net book value of the machine at the end of Year 2. Note: Amounts to be deducted should be indicated by a minus sign. Net book value of machine at end of Year 2 $ Equipment (cost) Accumulated depreciation Net book value at end of year 2 30,700 meng 30,700
Century 21 Accounting General Journal
11th Edition
ISBN:9781337680059
Author:Gilbertson
Publisher:Gilbertson
Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets
Section: Chapter Questions
Problem 6AP
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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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