An asset is purchased on January 1 at a cost of $25,000. It is expected to be used for four years and have a salvage value of $1,000. Calculate the depreciation expense for each year of the asset's useful life under each of the following methods: (Show Work) Straight-line method Double-declining-balance method Sum-of-the-years-digits' method a. Year Depreciation Book Value 1 2 3 4 b. Year Depreciation Book Value 1 2 3 4 c. Year Depreciation Book Value 1 2 3 4
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.
- An asset is purchased on January 1 at a cost of $25,000. It is expected to be used for four years and have a salvage value of $1,000. Calculate the
depreciation expense for each year of the asset's useful life under each of the following methods:
(Show Work)
- Straight-line method
- Double-declining-balance method
- Sum-of-the-years-digits' method a. Year Depreciation Book Value
1
2
3
4
b. Year Depreciation Book Value
1
2
3
4
c. Year Depreciation Book Value
1
2
3
4
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