In January 2017, installation costs of $6,000 on newmachinery were charged to Maintenance and RepairsExpense. Other costs of this machinery of $30,000 werecorrectly recorded and have been depreciated using thestraight-line method with an estimated life of 10 yearsand no salvage value. At December 31, 2018, it is decidedthat the machinery has a remaining useful life of 20 years,starting with January 1, 2018. What entry(ies) should bemade in 2018 to correctly record transactions related tomachinery, assuming the machinery has no salvage value?The books have not been closed for 2018 and depreciationexpense has not yet been recorded for 2018.
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.
In January 2017, installation costs of $6,000 on new
machinery were charged to Maintenance and Repairs
Expense. Other costs of this machinery of $30,000 were
correctly recorded and have been
straight-line method with an estimated life of 10 years
and no salvage value. At December 31, 2018, it is decided
that the machinery has a remaining useful life of 20 years,
starting with January 1, 2018. What entry(ies) should be
made in 2018 to correctly record transactions related to
machinery, assuming the machinery has no salvage value?
The books have not been closed for 2018 and depreciation
expense has not yet been recorded for 2018.
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