Holt Company purchased a computer for $8,000 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2018, the estimates are revised. Holt now feels the computer will be used until December 31, 2019, when it can be sold for $500. Compute the 2018 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.
Holt Company purchased a computer for $8,000 on January 1, 2016. Straight-line
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
