Ray Electric Company purchased a 10,000 ft2 office space for $1,000,000 torelocate its engineering office on May 1, 2012. Determine the allowed depreciation in years 2012 and 2013.
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.
Ray Electric Company purchased a 10,000 ft2 office space for $1,000,000 to
relocate its engineering office on May 1, 2012. Determine the allowed
Depreciation would be described as the systematic lowering of the reported cost of a fixed asset till the asset's value becomes zero or inconsequential in accounting terms.
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