A Kubota tractor acquired on January 9 at a cost of $80,000 has an estimated useful life
Question:
A Kubota tractor acquired on January 9 at a cost of $80,000 has an estimated useful life of 25 years. Assuming that it will have no residual value, determine the depreciation for each of the first two years
(a) By the straight-line method and
(b) By the double-declining balance method.
Step by Step Answer:
First Year Second Year a 4 o...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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