Rayya Co. purchases a machine for $105,000 on January 1, 2019. Straight-line depreciation is taken each year for four years assuming a seven-year life and no salvage value. The machine is sold on July 1, 2023, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2023, and to record the sale under each separate situation. 1. The machine is sold for $45,500 cash. 2. The machine is sold for $25,000 cash.
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.
Rayya Co. purchases a machine for $105,000 on January 1, 2019. Straight-line
year for four years assuming a seven-year life and no salvage value. The machine is sold on July 1, 2023,
during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2023, and
to record the sale under each separate situation.
1. The machine is sold for $45,500 cash. 2. The machine is sold for $25,000 cash.
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