Patterson recently reported EBITA of $14.5 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?
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.
Patterson recently reported EBITA of $14.5 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for
Depreciation:
It is the non-cash expenses that is charged against the tangible assets of the organisation.
Example: depreciation on fixed asset.
Amortization:
It is a non-cash expense that is charged against the intangible assets of the organisation.
Example: amortization on goodwill and trademark
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