Plummer Industries purchased a machine for $43,800 and is depreciating it with the straight-linemethod over a life of 8 years, using a residual value of $3,000. At the beginning of the sixth year,an extraordinary repair was made costing $7,500, the estimated useful life was extended to 13years, and no change was made to the estimated residual value. Calculate depreciation expense foryear 6, rounded 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.
Plummer Industries purchased a machine for $43,800 and is
method over a life of 8 years, using a residual value of $3,000. At the beginning of the sixth year,
an extraordinary repair was made costing $7,500, the estimated useful life was extended to 13
years, and no change was made to the estimated residual value. Calculate depreciation expense for
year 6, rounded to the nearest dollar.
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