Equipment acquired on October 1, 2014, at a cost of $540,000 has an estimated useful life of 10 years. The residual value is estimated to be $55,000 at the end of the equipment's useful life. The company has a December 31 year end. Instructions Calculate the depreciation expense for December 31, 2014 and 2015 using: the straight-line method. b. the double diminishing-balance method.
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.
- Equipment acquired on October 1, 2014, at a cost of $540,000 has an estimated useful life of 10 years. The residual value is estimated to be $55,000 at the end of the equipment's useful life. The company has a December 31 year end.
Instructions
Calculate the
- the straight-line method.
b. the double diminishing-balance method.
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