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On January 5, 20X1, Terrell Company purchased a new $400,000 machine with a five-year useful life and

Question:

On January 5, 20X1, Terrell Company purchased a new $400,000 machine with a five-year useful life and an estimated salvage value of $30,000.


INSTRUCTIONS
Prepare a schedule showing the annual depreciation and accumulated depreciation for each of the first three years of the asset’s life under (1) the straight-line method, (2) the sum-of-the-years’-digits method, and (3) the double-declining-balance method.
Analyze: If the double-declining-balance method is used, what would be the book value of the machine at the end of 20X3?

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Analyze The book value at the end of 20X3 is 86400 400000 313600 Yea...View the full answer


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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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