Waterway Industries purchased machinery on January 2, 2015, for $860000. The straight-line method is used and useful life is estimated to be 10 years, with a $80000 salvage value. At the beginning of 2021 Waterway spent $190000 to overhaul the machinery. After the overhaul, Waterway estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $40000. The depreciation expense for 2021 should be
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.
Waterway Industries purchased machinery on January 2, 2015, for $860000. The straight-line method is used and useful life is estimated to be 10 years, with a $80000 salvage value. At the beginning of 2021 Waterway spent $190000 to overhaul the machinery. After the overhaul, Waterway estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $40000. The
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