Thorndale Inc. purchased a machine costing $400,000 from Drexel Manufacturing on March 31, 2020. Thorndale had to pay Express Freight Co. $10,000 to deliver and install the machine, which was placed into service on that date. Thorndale estimated that the machine would have a useful life of 10 years and $20,000 residual value. Thorndale uses the double-declining balance method for depreciation. Required: 1) Calculate depreciation expense for the machine for the year ended December 31, 2020. 1) Calculate depreciation expense for the machine for the year ended December 31, 2021.
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.
Thorndale Inc. purchased a machine costing $400,000 from Drexel Manufacturing on March 31, 2020. Thorndale had to pay Express Freight Co. $10,000 to deliver and install the machine, which was placed into service on that date. Thorndale estimated that the machine would have a useful life of 10 years and $20,000 residual value. Thorndale uses the double-declining balance method for
Required:
1) Calculate depreciation expense for the machine for the year ended December 31,
2020.
1) Calculate depreciation expense for the machine for the year ended December 31, 2021.
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