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Dower Corporation prepares its financial statements according to IFRS. On March 31, 2024, the company purchased equipment

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Dower Corporation prepares its financial statements according to IFRS. On March 31, 2024, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the straight-line depreciation method for all equipment. On December 31, 2024, the end of the company’s  fiscal year, Dower chooses to revalue the equipment to its fair value of $220,000.


Required:
1. Calculate depreciation for 2024.
2. Prepare the journal entry to record the revaluation of the equipment.
3. Calculate depreciation for 2025.
4. Repeat requirement 2, assuming that the fair value of the equipment at the end of 2024 is $195,000.

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Intermediate Accounting

Intermediate Accounting

ISBN: 9781264134526

11th Edition

Authors: David Spiceland

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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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