ABC Ltd, purchased a machinery worth of $ 100,000 in the year 2018.The machinery has no resale value and has a useful life of 5 years. The machine can be used for a total of 50,000 machine hours. If the machine was used for 15,000 hours in the first year. What is the value of depreciation in the first year based on the activity-based method of depreciation?
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.
ABC Ltd, purchased a machinery worth of $ 100,000 in the year 2018.The machinery has no resale value and has a useful life of 5 years. The machine can be used for a total of 50,000 machine hours. If the machine was used for 15,000 hours in the first year. What is the value of
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