Indicate where the following items would ordinarilyappear on the financial statements of Boleyn, Inc. for theyear 2017.(a) The service life of certain equipment was changedfrom 8 to 5 years. If a 5-year life had been used previously,additional depreciation of $425,000 wouldhave been charged.(b) In 2017, a flood destroyed a warehouse that had a bookvalue of $1,600,000. Floods are rare in this locality.(c) In 2017, the company wrote off $1,000,000 of inventorythat was considered obsolete.(d) In 2014, a supply warehouse with an expected usefullife of 7 years was erroneously expensed.(e) Boleyn, Inc. changed from weighted-average to FIFOinventory pricing.
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.
Indicate where the following items would ordinarily
appear on the financial statements of Boleyn, Inc. for the
year 2017.
(a) The service life of certain equipment was changed
from 8 to 5 years. If a 5-year life had been used previously,
additional
have been charged.
(b) In 2017, a flood destroyed a warehouse that had a book
value of $1,600,000. Floods are rare in this locality.
(c) In 2017, the company wrote off $1,000,000 of inventory
that was considered obsolete.
(d) In 2014, a supply warehouse with an expected useful
life of 7 years was erroneously expensed.
(e) Boleyn, Inc. changed from weighted-average to FIFO
inventory pricing.
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