Ivanhoe Company purchased a machine with a list price of $166000. They were given a 5% discount by the manufacturer. They paid $1000 for shipping and sales tax of $7500. Ivanhoe estimates that the machine will have a useful life of 10 years and a salvage value of $50000. If Ivanhoe uses straight-line depreciation, annual depreciation will be $10770. $16620. $11620. $11550.
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.
Ivanhoe Company purchased a machine with a list price of $166000. They were given a 5% discount by the manufacturer. They paid $1000 for shipping and sales tax of $7500. Ivanhoe estimates that the machine will have a useful life of 10 years and a salvage value of $50000. If Ivanhoe uses straight-line
$10770.
$16620.
$11620.
$11550.
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