On March 1, 2018, CBS acquired a machine for €50,000 in cash. The estimated useful life was 10 years while the anticipated salvage value was €2,000. Below are presented a set of independent situations: 1. The machine is completely destroyed by a fire on June 1, 2021. CBS is entitled of an insurance settlement of €30,000. Assume that the settlement was received during the next fiscal period. 2. On November 1, 2022, CBS sold the machine for €32,000 for cash to XZY company. 3. On July 1, 2020, CBS trades its machine for a new equipment of XZY. The exchange lacks commercia
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.
A. On March 1, 2018, CBS acquired a machine for €50,000 in cash. The estimated useful life was 10 years while the anticipated salvage value was €2,000. Below are presented a set of independent situations:
1. The machine is completely destroyed by a fire on June 1, 2021. CBS is entitled of an insurance settlement of €30,000. Assume that the settlement was received during the next fiscal period.
2. On November 1, 2022, CBS sold the machine for €32,000 for cash to XZY company.
3. On July 1, 2020, CBS trades its machine for a new equipment of XZY. The exchange lacks commercial substance.
Required:
For each independent situation, present the
Additional information
a. Assume that CBS uses the
b. The fiscal year of CBS commences on January 1 and ends on December 31 of each year.
B. CBS controls a fully
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