Mayan Ltd acquired a machine on 2 January 2018 that needs a major inspection every 2 years. The cost price of the machine is N$2 000 000 and it is estimated that the cost of a major inspection will be N$200 000. The useful life of the machine is estimated to be 8 years and the company has a 31 December year end. REQUIRED TO; Show the carrying amount of the machine as at 31 December 2018 and 2019.
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.
QUESTION
Mayan Ltd acquired a machine on 2 January 2018 that needs a major inspection every 2 years. The cost price of the machine is N$2 000 000 and it is estimated that the cost of a major inspection will be N$200 000. The useful life of the machine is estimated to be 8 years and the company has a 31 December year end.
REQUIRED TO;
Show the carrying amount of the machine as at 31 December 2018 and 2019.
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