On January 2, 2012, Mosler, Inc., purchased equipment for $85, 000. The equipment was expected to have a $10,000 salvage value at the end of its estimated six-year useful life. Straight line depreciation has been recorded. Before adjusting the accounts for 2016, Mosler decided that the useful life of the equipment should be extended by three years and the salvage value decreased by $8,000. Prepare a journal entry to record depreciation expense on the equipment for 2016. What is the book value of the equipment at the end of 2016 (after recording the depreciation expense for 2016)?
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.
E9-4A.
Revision of
On January 2, 2012, Mosler, Inc., purchased equipment for $85, 000. The equipment was expected to have a $10,000 salvage value at the end of its estimated six-year useful life. Straight line depreciation has been recorded. Before adjusting the accounts for 2016, Mosler decided that the useful life of the equipment should be extended by three years and the salvage value decreased by $8,000.
- Prepare a
journal entry to record depreciation expense on the equipment for 2016. - What is the book value of the equipment at the end of 2016 (after recording the depreciation expense for 2016)?
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