XYZ Company purchased a machine at a cost of $ 125,000 on 30/5/2020. The machine is expected to have a $20,000 salvage value at the end of its 5-year useful life. Instructions: Compute the depreciation rate. Using the straight-line method, prepare a depreciation schedule, showing the annual depreciation expense for the machine over its 5-years life. Record the depreciation expense on 31/12/2020 in the general journal. What are the factors influencing the choice of the depreciation method of plant assets
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.
XYZ Company purchased a machine at a cost of $ 125,000 on 30/5/2020. The machine is expected to have a $20,000 salvage value at the end of its 5-year useful life.
Instructions:
- Compute the depreciation rate.
- Using the straight-line method, prepare a depreciation schedule, showing the annual depreciation expense for the machine over its 5-years life.
- Record the depreciation expense on 31/12/2020 in the general journal.
- What are the factors influencing the choice of the depreciation method of plant assets.
(Note: Answer must be provided in tables)
- Depreciation. Rate
- Dep. Schedule :
|
Year |
|
Dep. Rate |
Annual Depreciation expenses |
Accumulated Depreciations |
Book Value |
3-
|
Date |
accounts |
Dr |
Cr |
4.
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