On January 1, 2020 a machine was purchased for 403,000 by Metlock Leasing co. The machine is expected to have 10 year life with no salvage value. It is to be depreciated on a straight line basis. The machine was leased to Ivanhoe Inc. for 3 years on January 1, 2020 with annual rent payments 68,440 due at the beginning of each year, starting January 1, 2020. The machine is expected to have residual value at the end of the lease term of $264,000, though this amount is unguaranteed. Prepare the 2020 journal e
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, 2020 a machine was purchased for 403,000 by Metlock Leasing co. The machine is expected to have 10 year life with no salvage value. It is to be
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