(a) Situation 1: Cheyenne Corporation purchased electrical equipment at a cost of $11,500 on June 2, 2020. From 2020 through 2023, the equipment was depreciated on a straight-line basis, under the assumption that it would have a 10-year useful life and a $1,900 residual value. After more experience and before recording 2024's depreciation, Cheyenne revised its estimate of the machine's useful life downward from a total of 10 years to 8 years, and revised the estimated residual value to $1,900. On April 29, 2025, after recording part of a year's depreciation for 2025, the company traded in the equipment for a newer model, and received a $3,700 trade-in allowance, even though the equipment's fair value was only $2,600. The new asset had a list price of $14,200 and the supplier accepted $10,500 cash for the balance. The new equipment was depreciated on a straight-line basis, assuming a seven-year useful life and a $1,130 residual value. Determine the amount of depreciation expense reported by Cheyenne for each fiscal year for the years ended December 31, 2020, to December 31, 2025. (Round depreciation expense per month and final answers to O decimal places, e.g. 5,275.) Year Depreciation expense 2020 $ 2021 $ 2022 2023 2024 +A $ 2025 +A $ +A $ LA
(a) Situation 1: Cheyenne Corporation purchased electrical equipment at a cost of $11,500 on June 2, 2020. From 2020 through 2023, the equipment was depreciated on a straight-line basis, under the assumption that it would have a 10-year useful life and a $1,900 residual value. After more experience and before recording 2024's depreciation, Cheyenne revised its estimate of the machine's useful life downward from a total of 10 years to 8 years, and revised the estimated residual value to $1,900. On April 29, 2025, after recording part of a year's depreciation for 2025, the company traded in the equipment for a newer model, and received a $3,700 trade-in allowance, even though the equipment's fair value was only $2,600. The new asset had a list price of $14,200 and the supplier accepted $10,500 cash for the balance. The new equipment was depreciated on a straight-line basis, assuming a seven-year useful life and a $1,130 residual value. Determine the amount of depreciation expense reported by Cheyenne for each fiscal year for the years ended December 31, 2020, to December 31, 2025. (Round depreciation expense per month and final answers to O decimal places, e.g. 5,275.) Year Depreciation expense 2020 $ 2021 $ 2022 2023 2024 +A $ 2025 +A $ +A $ LA
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 8P: At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the...
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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.
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Situation 1: Cheyenne Corporation purchased electrical equipment at a cost of $11,500 on June 2, 2020. From 2020 through
2023, the equipment was depreciated on a straight-line basis, under the assumption that it would have a 10-year useful life and a
$1,900 residual value. After more experience and before recording 2024's depreciation, Cheyenne revised its estimate of the
machine's useful life downward from a total of 10 years to 8 years, and revised the estimated residual value to $1,900.
On April 29, 2025, after recording part of a year's depreciation for 2025, the company traded in the equipment for a newer model,
and received a $3,700 trade-in allowance, even though the equipment's fair value was only $2,600. The new asset had a list price
of $14,200 and the supplier accepted $10,500 cash for the balance. The new equipment was depreciated on a straight-line basis,
assuming a seven-year useful life and a $1,130 residual value.
Determine the amount of depreciation expense reported by Cheyenne for each fiscal year for the years ended December 31,
2020, to December 31, 2025. (Round depreciation expense per month and final answers to O decimal places, e.g. 5,275.)
Year
Depreciation expense
2020
$
2021
$
2022
+A
$
2023
2024
2025
+A
$
+A
$
$
LA
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