Winston Churchill Construction Co. purchased a state-of-the-art excavator for $62,000. The company expected the equipment to last eight years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the fourth year the equipment was driven 32,000 miles. Compute the depreciation for the fourth year under units of activity method 32,000
Winston Churchill Construction Co. purchased a state-of-the-art excavator for $62,000. The company expected the equipment to last eight years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the fourth year the equipment was driven 32,000 miles. Compute the depreciation for the fourth year under units of activity method 32,000
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter18: Accounting For Long-term Assets
Section: Chapter Questions
Problem 6CE
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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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