On January 1, 2017, Macca, Inc., purchased equipment for OR 200,000. Macca expected a residual value OR 20,000, and service life of 5 years. Macca uses the double-declining-balance method to depreciate this type of asset. During 2019, the company switched from double-declining balance to straight-line depreciation. The residual value remained at OR 20,000. The amount of depreciation to be recorded at the end of 2019 would be: Select one: O a. 18,667 O b. 24,000 O c. 14,857 d. 17,333
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 1, 2017, Macca, Inc., purchased equipment for OR 200,000. Macca expected a residual value OR 20,000, and service life of 5 years. Macca uses the double-declining-balance method to
Select one:
O a. 18,667
O b. 24,000
O c. 14,857
d. 17,333
Assets: Assets are the resources of an organization used for the purpose of business operations. They include both current and non-current assets. The assets which are used or are converted into cash within a year or less are called current assets and assets which are used for long term i.e. more than a year are called non-current or long term assets.
Depreciation: It is the value of the asset diminished for its use in the business operations. Thus, a portion of the value used in a year is treated as expense and is charged against the revenues.
Useful life: It is the period during which the asset is expected to work or is used for the purpose of business operations.
Salvage value: It is the expected value that can be fetched for an asset at the end of its useful like.
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