Teal, Inc. owns equipment that cost $134,000 and has a useful life of 10 years with no salvage value. On January 1, 2017, Teal leases the equipment to Morgan Corporation for one year with one rental payment of $13,800 on January 1. Prepare Teal’s 2017 journal entries.
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.
Teal, Inc. owns equipment that cost $134,000 and has a useful life of 10 years with no salvage value. On January 1, 2017, Teal leases the equipment to Morgan Corporation for one year with one rental payment of $13,800 on January 1. Prepare Teal’s 2017
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