1. Conejo Company, which uses a calendar year, purchased a piece of equipment for $50,000 on January 3, 2010. It estimates the equipment will have a useful life of 8 years and $4,000 residual value. The equipment is used to produce 200,000 units during its useful life. The actual numbers of units produced were 20,000 during 2010, 33,000 during 2011, 18,000 during 2012, and 28,000 during 2013. Using the straight-line method, what is the book value at December 31, 2012?
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.
1. Conejo Company, which uses a calendar year, purchased a piece of equipment for $50,000 on January 3, 2010. It estimates the equipment will have a useful life of 8 years and $4,000 residual value. The equipment is used to produce 200,000 units during its useful life. The actual numbers of units produced were 20,000 during 2010, 33,000 during 2011, 18,000 during 2012, and 28,000 during 2013. Using the straight-line method, what is the book value at December 31, 2012?
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