ournal entries to record the purchase of the new refrigerators and the sale of the old refrigerators would include:
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.
Highsmith Rental Company purchased an apartment building early in 2016. There are 20 apartments in the building and each is furnished with major kitchen appliances. The company has decided to use the group
|
Appliance |
Cost |
Residual Value |
Service Life (in Years) |
|
Stoves |
$15,000 |
$3,000 |
6 |
|
Refrigerators |
10,000 |
1,000 |
5 |
|
Dishwashers |
8,000 |
500 |
4 |
In 2019, three new refrigerators costing a total of $3,000 were purchased for cash. The old refrigerators, which originally cost a total of $1,500 were sold for $400.
Question
|
Credit to Gain on Sale of Refrigerators of $1,100 |
||
|
Credit to Cash of $400 |
||
|
Credit to Refrigerators-NEW of $3,000 |
||
|
Debit to |
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
