Machinery purchased for $52,000 by Carver Co. in 2018 was originally estimated to have a life of
Question:
Machinery purchased for $52,000 by Carver Co. in 2018 was originally estimated to have a life of 8 years with a residual value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2023, it is determined that the total estimated life should be 10 years with a residual value of $4,500 at the end of that time. Assume straight-line depreciation.
Instructions
a. Prepare the entry to correct the prior years’ depreciation, if necessary.
b. Prepare the entry to record depreciation for 2023.
Step by Step Answer:
a To correct the prior years depreciation the entry would be as follows Debit Accumulated ...View the full answer
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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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