McKnight depreciated the shelving on a double-declining-balance basis, with $1,500 estimated residual value. On September 30, 2019, the company sold the shelving for $2,400 cash. Record both the depreciation expense on the shelving for 2019 and its sale in September. Also show how to compute the gain
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.
On January 2, 2018, McKnight Furniture purchased display shelving for $8,000 cash, expecting the shelving to remain in service for five years. McKnight
| Record both the depreciation expense on the shelving for 2019 and its sale in September. Also show how to compute the gain or loss on the disposal of the shelving. |
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