On January 1, 2018, Suzanne Company purchased equipment for $48,000. The estimated life was five years and the salvage value was estimated at $5,000. On January 1, 2020, it was determined that the equipment's total useful life should have been estimated at seven years and the salvage value should have been estimated at only $4,000. The company used straight-line depreciation. Required: a. If an adjusting entry is necessary on January 1, 2020, prepare it. If no entry is required, select "No entry required". b. Compute the amount of depreciation expense on the equipment for 2020.
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, Suzanne Company purchased equipment for $48,000. The estimated life was five years and the salvage value was estimated at $5,000. On January 1, 2020, it was determined that the equipment's total useful life should have been estimated at seven years and the salvage value should have been estimated at only $4,000. The company used straight-line
Required:
a. If an
b. Compute the amount of depreciation expense on the equipment for 2020.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
