and various method
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.
In recent years, Blossom Corporation has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the
| Machine | Acquired | Cost | Residual Value |
Useful Life (in years) |
Depreciation Method | |||||
| 1 | Jan. 1, 2022 | $101,200 | $11,600 | 5 | Straight-line | |||||
| 2 | July 1, 2023 | 81,250 | 9,520 | 5 | Diminishing-balance | |||||
| 3 | Nov. 1, 2023 | 66,430 | 6,550 | 6 | Units-of-production |
For the diminishing-balance method, Blossom Corporation uses double the straight-line rate. For the units-of-production method, total machine hours are expected to be 24,950. Actual hours of use in the first 3 years were: 2023, 420; 2024, 4,440; and 2025, 5,500.
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