Parts Co purchased an asset for $40,000 on 1.1.2017. It had an estimated useful life of 8 years and it was depreciated using the straight-line method. On 1.1.2019 Parts Co revised the remaining estimated useful life to 5 years. What is the carrying amount of the asset at 31.12.2019?
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.
Why is carrying amount as at 31.12.2019 found by 30,000 - 6,000?
Asking because carrying value formula is cost minus accummulated
Is 24,000 answer correct?
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