On January 2, 2017, Ares Enterprises reports balances in the Equipment account of $32,000 and Accumulated Depreciation-Equipment
Question:
On January 2, 2017, Ares Enterprises reports balances in the Equipment account of $32,000 and Accumulated Depreciation-Equipment account of $9,000. The equipment had an original residual value of $2,000 and a 10-year useful life. Ares uses straight-line depreciation for equipment. On this date, the company decides that the equipment has a remaining useful life of only four years with the same residual value. Calculate the revised annual depreciation.
Step by Step Answer:
Carrying amount Jan 1 2017 32000 9000 23...View the full answer
Accounting Principles
ISBN: 978-1119048503
7th Canadian Edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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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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