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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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What factors must be known or estimated in order to compute depreciation expense?

To determine

Depreciation:

The depreciation is the expense which is debited to the income statement in the ratio of the period of the respective asset. It is an estimate only as it is computed on the basis of estimated life and the scrap value estimated by the company using that asset.

The factors that must be known to calculate the depreciation.

Explanation

The depreciation is the expense which is charged on the asset having long life for use i.e. operating assets against the income and computed on the basis of its estimate life and scrap value after use.

The depreciation is computed by using the following formula:

Depreciation Expense=Cost of the AssetResidual ValueUseful Life of the Asset

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