On Jan. 2, 2014, Sirap Co. bought a mounding machine for $400,000. The machine has an 8-year useful life with Zero residual value. The company used the Straight-Line Depreciation method. On Jan. 2, 2017, the company changed to the Double Declining Balance depreciation method. Compute depreciation expense that should be taken for 2017.
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 Jan. 2, 2014, Sirap Co. bought a mounding machine for $400,000. The machine has an 8-year useful life with Zero residual value. The company used the
Straight-Line Depreciation method. On Jan. 2, 2017, the company changed to the Double Declining Balance depreciation method. Compute depreciation expense that should be taken for 2017.
Ignore all income tax considerations.
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