On January 01, 2019, the AI Wadi Company purchased machinery for OR 45,000. The estimated useful life of the machinery is 8 years and the estimated residual value is OR 5,000. Al Afiya's financial year ends on December 31. The machine is expected to produce 120,000 units during its life. Using the double-declining balance method, depreciation for 2020 would be: Round all computations to the nearest Riyal. Select one: O a. 8,438 O b. 8,750. O c. 7,500. O d. 7,188.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 01, 2019, the
Select one:
O a. 8,438
O b. 8,750.
O c. 7,500.
O d. 7,188.
Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life, is referred to as the double-declining-balance method.
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