Pier Exports purchased equipment on January 1, 2018, at a cost of $600,000. The company estimates that there will be $60,000 salvage value and that the equipment will have a useful life of 8 years. The company elects to use the sum-of-the-years' digit method until 2021, at which time the company changes to the straight-line method of depreciation for the equipment. Required: 1. The equipment's book value at January 1, 2021 is $ _________. Round your final answer to the nearest dollar. 2. The annual depreciation expense for 2021 is $ _________. Round your final answer to the nearest dollar.
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.
Pier Exports purchased equipment on January 1, 2018, at a cost of $600,000. The
company estimates that there will be $60,000 salvage value and that the equipment
will have a useful life of 8 years. The company elects to use the sum-of-the-years'
digit method until 2021, at which time the company changes to the straight-line
method of
Required:
1. The equipment's book value at January 1, 2021 is $ _________. Round your final answer to the nearest dollar.
2. The annual depreciation expense for 2021 is $ _________. Round your final answer to the nearest dollar.
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