Tedesco Company changed depreciation methods in 2012 from double-declining-balance to straight line. Depreciation prior to 2012 under
Question:
Tedesco Company changed depreciation methods in 2012 from double-declining-balance to straight line. Depreciation prior to 2012 under double-declining-balance was $90,000, whereas straight-line depreciation prior to 2012 would have been $50,000. Tedesco’s depreciable assets had a cost of $250,000 with a $40,000 salvage value, and an 8-year remaining useful life at the beginning of 2012. Prepare the 2012 journal entries, if any, related to Tedesco’s depreciable assets.
Step by Step Answer:
Tedesco Companys 2012 journal entry related to the change in depreciation method from doubledeclinin...View the full answer
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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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