O’Keefe Advertising Company reported the following on its December 31, 2012 balance sheet: Equipment..... $500,000Accumulated depreciation—equipment....$135,000 In a footnote, the company indicates that it uses straight-line depreciation over 10 years and estimates salvage value as 10% of cost. What is the average age of the equipment owned by the company? Answer is B. 3 years how do you get to this answer, please show all math computations
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.
O’Keefe Advertising Company reported the following on its December 31, 2012
balance sheet: Equipment..... $500,000
In a footnote, the company indicates that it uses straight-line depreciation over 10 years and estimates salvage value as 10% of cost. What is the average age of the equipment owned by the company?
Answer is B. 3 years
how do you get to this answer, please show all math computations
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