Jay Hawk, maintenance supervisor for Boston InsuranceCo., has purchased a riding lawnmower and accessoriesto be used in maintaining the grounds around corporateheadquarters. He has sent the following information tothe accounting department.Cost of mower and accessories $4,000 Date purchased 7/1/17 Monthly salary of groundskeeper $1,100 Estimated useful life 5 yrsSalvage value $0Estimated annual fuel cost $150 Compute the amount of depreciation expense (related tothe mower and accessories) that should be reported onBoston’s December 31, 2017, income statement.Assume straight-line depreciation.
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.
Jay Hawk, maintenance supervisor for Boston Insurance
Co., has purchased a riding lawnmower and accessories
to be used in maintaining the grounds around corporate
headquarters. He has sent the following information to
the accounting department.
Cost of mower and accessories $4,000
Date purchased 7/1/17
Monthly salary of groundskeeper $1,100
Estimated useful life 5 yrs
Salvage value $0
Estimated annual fuel cost $150
Compute the amount of
the mower and accessories) that should be reported on
Boston’s December 31, 2017, income statement.
Assume straight-line depreciation.
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