A building that was purchased on December 31, 2006, for $2,500,000 was originally estimated to have a life of 50 years with no salvage value at the end of that time. Depreciation has been recorded through 2020. During 2021, an examination of the building by an engineering firm discloses that its estimated useful life is 15 years after 2020. What should be the amount of depreciation for 2021?
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.
A building that was purchased on December 31, 2006, for $2,500,000 was originally estimated to have a life of 50 years with no salvage value at the end of that time.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
