LO 6 Exercise 8-15A Revision of estimated useful life On January 1, 2011, Harris Machining Co. purchased a compressor and related installation equipment for $64,000. The equipment had a three-year estimated life with a $4,000 salvage value. Straight-line depreciation was used. At the beginning of 2013, Harris revised the expected life of the asset to four years rather than three years. The salvage value was revised to $3,000. Required Compute the depreciation expense for each of the four years. Accounting for Long-Term Operational Assets 427
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.
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