On January 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be 4 years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 12,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the first year assuming the company uses: 1. The straight-line method of depreciation 2. The units-of-production method of depreciation 3. The double-declining balance method of depreciation GENERAL JOURNAL Account Titles and Explanation PR Debit Credit Requirement 1 Dec. 31 Record annual depreciation. Show calculation below. Requirement 2 Dec. 31 Record annual depreciation. Show calculation below. Requirement 3 Dec. 31 Record annual depreciation. Show calculation below.
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 of the current year, a company purchased and placed in service a machine with a cost of $240,000. | |||||
| The company estimated the machine's useful life to be 4 years or 60,000 units of output with an estimated | |||||
| salvage value of $60,000. During the current year, 12,000 units were produced. | |||||
| Prepare the necessary December 31 |
|||||
| first year assuming the company uses: | |||||
| 1. The straight-line method of depreciation | |||||
| 2. The units-of-production method of depreciation | |||||
| 3. The double-declining balance method of depreciation | |||||
| GENERAL JOURNAL | |||||
| Account Titles and Explanation | PR | Debit | Credit | ||
| Requirement 1 | |||||
| Dec. | 31 | ||||
| Record annual depreciation. Show calculation below. | |||||
| Requirement 2 | |||||
| Dec. | 31 | ||||
| Record annual depreciation. Show calculation below. | |||||
| Requirement 3 | |||||
| Dec. | 31 | ||||
| Record annual depreciation. Show calculation below. | |||||
1. Depreciation Expenses -
Depreciation Expenses are the expense incurred on the wear and tear of the fixed assets. This is incurred on use, the passage of time, or effluxion. This is an expense booked on the income statement debit side of the organization.
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