On Oct 1, 2018, Net Solutions purchased a piece of high-tech equipment for $384,000, which is expected to have a four-year useful life and a residual value of $24,000. The company uses straight-line depreciation and has a December 31 fiscal year end. On July 1, 2019, $4,200 was paid for normal repairs necessary to keep the equipment in good working order. On Nov. 10, 2020, $22,000 cash was paid for a new component expected to increase the equipment's productivity by 10% a year. Calculate the annual depreciation expense. Journalize the yearly depreciation expense at Dec. 31 2019. 2) Journalize the transaction on Oct. 1, 2018, Jul. 1, 2019 and Nov. 10, 2020.
On Oct 1, 2018, Net Solutions purchased a piece of high-tech equipment for $384,000, which is expected to have a four-year useful life and a residual value of $24,000. The company uses straight-line depreciation and has a December 31 fiscal year end. On July 1, 2019, $4,200 was paid for normal repairs necessary to keep the equipment in good working order. On Nov. 10, 2020, $22,000 cash was paid for a new component expected to increase the equipment's productivity by 10% a year. Calculate the annual depreciation expense. Journalize the yearly depreciation expense at Dec. 31 2019. 2) Journalize the transaction on Oct. 1, 2018, Jul. 1, 2019 and Nov. 10, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Question
On Oct 1, 2018, Net Solutions
purchased a piece of high-tech equipment
for $384,000, which is expected to have a
four-year useful life and a residual value of
$24,000. The company uses straight-line
year end. On July 1, 2019, $4,200 was paid
for normal repairs necessary to keep the
equipment in good working order. On Nov. 10,
2020, $22,000 cash was paid for a new
component expected to increase the
equipment's productivity by 10% a year. Calculate the annual depreciation
expense. Journalize the yearly depreciation
expense at Dec. 31 2019. 2) Journalize the
transaction on Oct. 1, 2018, Jul. 1, 2019 and
Nov. 10, 2020.
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