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Assume that Bloomer Company purchased a new machine on January 1, 2012, for $80,000. The machine has

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Assume that Bloomer Company purchased a new machine on January 1, 2012, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2014, Bloomer discovered that the machine would not be useful beyond December 31, 2017, and estimated its value at that time to be $2,000.

Required

1. Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2012 to 2017.

2. Was the depreciation recorded wrong in 2012 and 2013? If so, why was it not corrected?

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1 Depreciation accumulated depreciation and book value for the straightline method should be as fol...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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