For each of the independent situations, prepare all the journal entries relating to the building for the fifth year. Ignore income taxes.
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.
| 1. | Bailand estimates that the asset has 8 years’ life remaining (for a total of 12 years). |
| 2. | Bailand changes to the sum-of-the-years’-digits method. |
| 3. | Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense. |
| Required: | |
| For each of the independent situations, prepare all the |
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