A plant asset was purchased on May 1, 2021. The asset had a cost of $54,000, a salvage value of $4,500, and an estimated useful life of 12 years. An additional $31,500 was paid for the delivery and installation of the asset. The straight-line method of depreciation is being used. What is the accumulated depreciation on this asset on the December 31, 2021 balance sheet?
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 plant asset was purchased on May 1, 2021. The asset had a cost of $54,000, a salvage value of $4,500, and an estimated useful life of 12 years. An additional $31,500 was paid for the delivery and installation of the asset. The straight-line method of
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