Mario Company completed the following transactions and events involving its production equipment Year 1 Jan. 1 Paid $35,780 for a new production equipment estimated to have a seven-year life and a $3,500 salvage value. Dec. 31 Record annual straight-line depreciation on the equipment Year 2 Dec. 31 The equipment’s estimated useful life was changed from seven to five years, and the estimated salvage value was decreased to $3,000. Record revised annual straight-line depreciation on the equipment Year 3 Dec.31 Record annual straight-line depreciation on the equipment Dec. 31 Sold the equipment for $18,000 cash. Prepare journal entries to record these transactions and events.
Mario Company completed the following transactions and events involving its production equipment Year 1 Jan. 1 Paid $35,780 for a new production equipment estimated to have a seven-year life and a $3,500 salvage value. Dec. 31 Record annual straight-line depreciation on the equipment Year 2 Dec. 31 The equipment’s estimated useful life was changed from seven to five years, and the estimated salvage value was decreased to $3,000. Record revised annual straight-line depreciation on the equipment Year 3 Dec.31 Record annual straight-line depreciation on the equipment Dec. 31 Sold the equipment for $18,000 cash. Prepare journal entries to record these transactions and events.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Question
| Mario Company completed the following transactions and events involving its production equipment | ||||||
| Year 1 | ||||||
| Jan. 1 | Paid $35,780 for a new production equipment estimated to have a seven-year life and a $3,500 salvage value. | |||||
| Dec. 31 | Record annual straight-line |
|||||
| Year 2 | ||||||
| Dec. 31 | The equipment’s estimated useful life was changed from seven to five years, and the estimated salvage value | |||||
| was decreased to $3,000. | ||||||
| Record revised annual straight-line depreciation on the equipment | ||||||
| Year 3 | ||||||
| Dec.31 | Record annual straight-line depreciation on the equipment | |||||
| Dec. 31 | Sold the equipment for $18,000 cash. | |||||
| Prepare |
||||||
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