Pier Exports purchases equipment on January 1 at a cost of $225,000. The company estimates that there will be no salvage value and that the eq three years, after which the company will change to the straight-line method of depreciation for the equipment. Required a. Compute annual depreciation expense for Year 1 through Year 3. b. Prepare the depreciation entry for the end of Year 4. Note: Round your final answers to the nearest whole number. a. Year Annual depreciation expense Year 1 $ Year 2 $
Pier Exports purchases equipment on January 1 at a cost of $225,000. The company estimates that there will be no salvage value and that the eq three years, after which the company will change to the straight-line method of depreciation for the equipment. Required a. Compute annual depreciation expense for Year 1 through Year 3. b. Prepare the depreciation entry for the end of Year 4. Note: Round your final answers to the nearest whole number. a. Year Annual depreciation expense Year 1 $ Year 2 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:Recording Depreciation with a Change in Depreciation Method
Pier Exports purchases equipment on January 1 at a cost of $225,000. The company estimates that there will be no salvage value and that the equipment will have a useful life of 10 years. The company elects to use the double-declining-balance method for the first
three years, after which the company will change to the straight-line method of depreciation for the equipment.
Required
a. Compute annual depreciation expense for Year 1 through Year 3.
b. Prepare the depreciation entry for the end of Year 4.
Note: Round your final answers to the nearest whole number.
a.
Year Annual depreciation expense
Year 1 $
Year 2 $
Year 3 $
b.
Date
Dec. 31, Year 4
Account Name
To record depreciation.
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