Sheridan Inc., reported the following information about two of its machines as at December 31, 2023. The new controller of the company, Wendy Weink, is proposing new estimates for the useful life and residual value of these machines for 2024. Machine Date Acquired #1 #2 Jan. 1, 2015 Jan. 1, 2023 Show Transcribed Text Accumulated depreciation Cost Carrying amount $854,000 119,730 Useful Life (in years) Original 20 5 Machine 1 Proposed 196,882.25 25 4 Calculate the accumulated depreciation and carrying amount of each asset on December 31, 2023. Residual Value Original $40,540 $5,000 Machine 2 Proposed $66,471 $3,367 29,090.75

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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.