Listed below are long-lived assets. The company uses the straight-line method to determine depreciation expense. Assume in
Question:
Required:
For each asset, calculate the depreciation expense for the first, third, fifth, and last year of the assets€™ useful lives.
Estimated useful life Item Lathe Building Earth-moving truck Electric turbine Stamping machine Cost 4,000,000 S25,000,000 S 700,000 S 7,000,000 S10,000,000 Estimated residual value s 200,000 S 500,000 S 70,000 s 800,000 $3,000,000 vears 20 years 6 years 10 years 9 years
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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