In January 20x8, Titania Co. purchased a machine that cost $80,000. The equipment is estimated to have a 4-year useful life and a salvage value of $12,000. a) Compute the amount of depreciation expense for 20x8 and 20x9 using sum-of-the-years'-digits method. b) Assume the Company used straight-line depreciation and sold the machine on July 1, 20x10 for $25,000 cash. Record the journal entry for the disposal and indicate the debit and credit entry(ies).
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 20x8, Titania Co. purchased a machine that cost $80,000. The equipment is estimated to have a 4-year useful life and a salvage value of $12,000.
a) Compute the amount of
b) Assume the Company used straight-line depreciation and sold the machine on July 1, 20x10 for $25,000 cash. Record the
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