Pharoah Inc., reported the following information about two of its machines as at December 31, 2023. The new controller of the company, Wendy Weink, is proposing new estimates for the useful life and residual value of these machines for 2024. Machine (a) # 1 # 2 Date Acquired Jan. 1, 2015 Jan. 1, 2023 Machine 1 6A Cost $867,500 108,010 Machine 2 $ Useful Life (in years) Original Proposed 20 25 5 Calculate the annual depreciation for each asset using the straight-line method. 4 Residual Value Original $37,520 $4,630 Proposed $62,105 $3,748
Pharoah Inc., reported the following information about two of its machines as at December 31, 2023. The new controller of the company, Wendy Weink, is proposing new estimates for the useful life and residual value of these machines for 2024. Machine (a) # 1 # 2 Date Acquired Jan. 1, 2015 Jan. 1, 2023 Machine 1 6A Cost $867,500 108,010 Machine 2 $ Useful Life (in years) Original Proposed 20 25 5 Calculate the annual depreciation for each asset using the straight-line method. 4 Residual Value Original $37,520 $4,630 Proposed $62,105 $3,748
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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Transcribed Image Text:Pharoah Inc., reported the following information about two of its machines as at December 31, 2023. The new controller of the
company, Wendy Weink, is proposing new estimates for the useful life and residual value of these machines for 2024.
Machine Date Acquired
Jan. 1, 2015
Jan. 1, 2023
(a)
# 1
# 2
Machine 1
SA
Cost
Machine 2 $
$867,500
108,010
Useful Life (in years)
Original Proposed
20
25
5
Calculate the annual depreciation for each asset using the straight-line method.
4
Residual Value
Original
$37,520
$4,630
Proposed
$62,105
$3,748
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