On January 1, 2018, Check Co. bought a machine for $15,000. Residual value was estimated to be $1,400 and a five-year life was used for straight-line depreciation. On January 1, 2020, it was estimated that the total life from acquisition date should have been six years and residual value should have been estimated at $600. Required:
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 1, 2018, Check Co. bought a machine for $15,000. Residual value was estimated to be $1,400 and a five-year life was used for straight-line
Required:
Compute depreciation expense for 2020.
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