Healthlabs Ltd. purchased lab equipment for $18,000 on January 1, 2020. At that time, management determined that
Question:
Healthlabs Ltd. purchased lab equipment for $18,000 on January 1, 2020. At that time, management determined that the equipment would have a useful life of three years with no residual value and that the straight-line depreciation method would be used. On January 1, 2021, management revised its initial estimate and determined that the company would be able to use the lab equipment for a total of five years.
Required
Determine the depreciation expense for 2021.
Step by Step Answer:
Cost of equipment Jan 1 2020 18000 Depreciation expense 2020 an...View the full answer
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley
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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