The Lazy 0 Ranch just purchased equipment costing $60,000. The equipment is expected to last five years
Question:
The Lazy 0 Ranch just purchased equipment costing $60,000. The equipment is expected to last five years and have no salvage value.
(a) Calculate the depreciation expense using the straight-line method for the first two years the equipment is owned.
(b) Calculate the depreciation expense using the double-declining balance method for the first two years the equipment is owned.
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
a per year b Year 1...View the full answer
Understanding financial statements
ISBN: 978-0136086246
9th Edition
Authors: Lyn M. Fraser, Aileen Ormiston
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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