Sandhill Company owns equipment that cost $61,200 when purchased on January 1. 2019. It has been depreciated using the straight-line method based on estimated salvage value of $4,200 and an estimated useful life of 5 years. Prepare Sandhill Company's journal entries to record the sale of the equipment in these four independent situations. Sold for $29,200 on January 1.2022. Sold for $29,200 on May 1, 2022. Sold for $10,200 on January 1, 2022. Sold for $ 10,200 on October 1, 2022
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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