XYZ Company purchases a machine On January 1, 2014 for $100,000 with an estimated residual value of $10,000 and useful life of four years. Use the double-declining balance method. Prepare the journal entry to record depreciation for 2016. If possible, compute the carrying value at the end of 2016. Determine the amount of depreciation expense in 2017.
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.
Problem 4
XYZ Company purchases a machine On January 1, 2014 for $100,000 with an estimated residual value of $10,000 and useful life of four years. Use the double-declining balance method.
- Prepare the
journal entry to recorddepreciation for 2016. - If possible, compute the carrying value at the end of 2016.
- Determine the amount of depreciation expense in 2017.
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