Lexia bought a new equipment at RM120,000 on 1 July 2017. He was undecided whether to depreciate the equipment using straight line method or reducing method at 20% per annum. The equipment is expected to have no residual value. You are required to calculate the amount of depreciation to be charged against each financial year ending 31 December 2017, 31 December 2018 and 31 December 2019 using the straight line method and reducing balance method.
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.
Lexia bought a new equipment at RM120,000 on 1 July 2017. He was
undecided whether to
The equipment is expected to have no residual value.
You are required to calculate the amount of depreciation to be charged against each financial year ending 31 December 2017, 31 December 2018 and 31 December 2019 using the straight line method and
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