ournalize this transaction: a. In 2009, ABC LTD purchased equipment for $2,000,000 , and its estimated useful life is 10 years. In 2014, technological advances in the industry made equipment obsolete. The value in use of the asset is $750,000 and the fair value is $500,000. Prepare the journal entry (if any) to record the impairment of the asset on December 31, 2014 b. ABC LTD purchased a machine for $2000 on January 1, 2011 that has a useful life of 5 years and an estimated salvage value of $500. The machine is depreciated using the double declining balance method. However, ABC LTD decided to sell the asset on January 1, 2013 for $1500 to raise cash for the purchase of a new machine. Journalize the transaction.
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.
Journalize this transaction:
a. In 2009, ABC LTD purchased equipment for $2,000,000 , and its estimated useful life is 10 years. In 2014, technological advances in the industry made equipment obsolete. The value in use of the asset is $750,000 and the fair value is $500,000. Prepare the
b. ABC LTD purchased a machine for $2000 on January 1, 2011 that has a useful life of 5 years and an estimated salvage value of $500. The machine is
Journalize the transaction.
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