Revision of Depreciation On January 2 of Year 1, Mosler, Inc., purchased equipment for $136,000. The equipment was expected to have a $13,000 salvage value at the end of its estimated six- year useful life. Straight-line depreciation has been recorded. Before adjusting the accounts for Year 5, Mosler decided that the useful life of the equipment should be extended by two years and the salvage value decreased to $10,000. a. Prepare a journal entry to record depreciation expense on the equipment for Year 5. Round your answer to the nearest dollar. General Journal Dec. 31 Depreciation Expense - Equipment Accumulated Depreciation - Equipment To record depreciation expense. Debit 20,500 x Credit 0▾ 15,750 x b. What is the book value of the equipment at the end of Year 5 (after recording the depreciation expense for Year 5)? Book Value at year ended December 31, Year 5: $ 20,500 x
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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