On January 1, 2016, Mullhausen Co. began using the composite depreciation method. There were three machines to consider, as follows: Residual Asset Cost Value Life A $20,000 $2,000 6 years B 15,000 3,000 3 years C 5,000 1,000 4 years At the end of the second year, Machine B was sold for $8,200. In the entry to record the sale, there should be a: A$1,200 debit to Gain on Sale of Machine B$6,800 debit to Accumulated Depreciation C$8,000 debit to Accumulated Depreciation D$6,800 debit to Loss on Sale of Machine
On January 1, 2016, Mullhausen Co. began using the composite depreciation method. There were three machines to consider, as follows: Residual Asset Cost Value Life A $20,000 $2,000 6 years B 15,000 3,000 3 years C 5,000 1,000 4 years At the end of the second year, Machine B was sold for $8,200. In the entry to record the sale, there should be a: A$1,200 debit to Gain on Sale of Machine B$6,800 debit to Accumulated Depreciation C$8,000 debit to Accumulated Depreciation D$6,800 debit to Loss on Sale of Machine
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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On January 1, 2016, Mullhausen Co. began using the composite depreciation method. There were three machines to consider, as follows:
At the end of the second year, Machine B was sold for $8,200. In the entry to record the sale, there should be a:
| Residual | |||
| Asset | Cost | Value | Life |
| A | $20,000 | $2,000 | 6 years |
| B | 15,000 | 3,000 | 3 years |
| C | 5,000 | 1,000 | 4 years |
At the end of the second year, Machine B was sold for $8,200. In the entry to record the sale, there should be a:
A$1,200 debit to Gain on Sale of Machine
B$6,800 debit to Accumulated Depreciation
C$8,000 debit to Accumulated Depreciation
D$6,800 debit to Loss on Sale of Machine
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