On May 1, 2015, Casico Toy Inc. purchased a new piece of equipment that cost $52,000. The estimated useful life is five years and the estimated residual value is $4,000. During the five years of useful life the equipment is expected to produce 20,000 units. If Toy Inc. uses the straight line method for depreciation, what is the depreciation expense for the year ended, December 31st, 2015: Multiple Choice None of the other alternatives are correct $6,400 $9,600 $5,600 $6,933
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 May 1, 2015, Casico Toy Inc. purchased a new piece of equipment that cost $52,000. The estimated useful life is five years and the estimated residual value is $4,000. During the five years of useful life the equipment is expected to produce 20,000 units.
If Toy Inc. uses the
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None of the other alternatives are correct
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$6,400
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$9,600
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$5,600
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$6,933
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