A printer that cost $600 and has been owned for 2 years is traded in for a new one. Depreciation in the amount of $120 had been taken each yearThe new printer has a fair market value of $1,250. A trade-in allowance of $400 is granted, and the balance is paid in cashThe transaction to enter the exchanges of these two assets would result in the recognition of?
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.
A printer that cost $600 and has been owned for 2 years is traded in for a new one.
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