On January 2, 20x1, equipment was acquired at a cost of $189,000. was assigned a useful life of 6 years, a residual value of $21,000 and was determined to be depreciated using the straight-line method. depreciated using the straight-line method. On January 2, 20x4, the equipment underwent equipment underwent an extraordinary repair at a cost of $17,500. This The investment in the equipment extended its useful life by two years in addition to the original estimate and its estimated residual value was original estimate and its estimated residual value was changed to $25,000. Instructions: 1. Prepare the entry capitalizing the investment made on January 2, 20x4. 2. Prepare the December 31, 20x4 depreciation expense entry. - Include organized evidence of computations performed.
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 2, 20x1, equipment was acquired at a cost of $189,000.
was assigned a useful life of 6 years, a residual value of $21,000 and was determined to be
depreciated using the straight-line method. On January 2, 20x4, the equipment underwent
equipment underwent an extraordinary repair at a cost of $17,500. This
The investment in the equipment extended its useful life by two years in addition to the original estimate and its estimated residual value was
original estimate and its estimated residual value was changed to $25,000.
Instructions:
1. Prepare the entry capitalizing the investment made on January 2, 20x4.
2. Prepare the December 31, 20x4 depreciation expense entry.
- Include organized evidence of computations performed.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
