The company purchased a machine for $60,000. The machine had an estimated residual value of $5,000 and
Question:
The company purchased a machine for $60,000. The machine had an estimated residual value of $5,000 and an estimated useful life of 11 years. After two full years of experience with the machine, it was determined that its total useful life would be only eight years instead of 11. In addition, a revised estimate of $12,000 was made for the residual value, instead of the original $5,000. Compute depreciation expense for the third year. The company uses straight-line depreciation.
Step by Step Answer:
Annual depreciation using the original estimates 60000 500011 years 5000 annual depreciatio...View the full answer
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Related Video
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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