The Jonathan Corp. acquires a machine with an original cost of $9000 on January 1, 2016. The machine has a five year life and estimated salvage value of $1000. a) Compute depreciation for 2016 and 2017 under each of the following methods: (i) Sum-of-years’ digits (ii) Diminishing-balance (iii) Straight-line
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.
The Jonathan Corp. acquires a machine with an original cost of $9000 on January 1, 2016. The
machine has a five year life and estimated salvage value of $1000.
a) Compute
(i) Sum-of-years’ digits
(ii) Diminishing-balance
(iii) Straight-line
Step by step
Solved in 2 steps
