Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been depreciated for six years by the straight-line method. Assume a fiscal year ending December 31. a. What is the book value at the end of the sixth year of use? $fill in the blank 1 b. If early in the seventh year it is estimated that the remaining useful life is five years (instead of four) and the residual value is $6,000, what is the amount of depreciation for the seventh year? $fill in the blank 2
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 costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been
a. What is the book value at the end of the sixth year of use?
$fill in the blank 1
b. If early in the seventh year it is estimated that the remaining useful life is five years (instead of four) and the residual value is $6,000, what is the amount of depreciation for the seventh year?
$fill in the blank 2
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