In: Accounting
1. Equipment is purchased which has an initial cost of $125,000. It has a 10-year life and its salvage value is estimated to be $12,000.
Determine the initial and annual entries in the accounting equation.
2. Equipment is purchased which has an initial cost of $125,000. It has a 10-year life and its salvage value is estimated to be $12,000.
Determine the book value of the asset after six years.
1) Accounting Equation =
Initially
Assets = Liability + Equity
125000 $( Asset) - 125000 $ (Cash) = 0 + 0
Annual Entry
125000 $ ( Asset) - 125000 $ (Cash) = 11300 (Acc Depreciation) - 11300 (Reduced from profit)
2)
Original cost = 125000 $
Depreciation = 125000 - 12000 / 10
= 11300 $
Depreciation = 11300 * 6
= 67800 $
Book value at the end of year 6 = 125000-67800
= 57200 $
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