On July 1, 2019, Cullumber Company purchased new equipment for $90,000. Its estimated useful life was 6 years with a $12,000 salvage value. On December 31, 2022, (before calculating annual depreciation) the company estimated that the equipment's remaining useful life was 10 years, with a revised salvage value of $5,000. (a) Prepare the journal entry to record depreciation on December 31, 2019. (Credit account titles are automatically indented when Do not indent manually. If .ng entry is required, select "No Entry" for the account titles and enter O for the amounts)

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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.