Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Concept explainers
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.
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Question
Transcribed Image Text:Engineering Economy, Chapter 16:
Depreciation Methods
The manager of a Glidden Paint
manufacturing plant is planning to use SL,
DDB or MACRS to compare the total
depreciation of the first 3 years for a recently
purchased mixer that has a first cost of
300,000 QAR, a 5-year recovery period, and a
60,000 QAR salvage value. Find total
depreciation of the first three years and the
book value at year 3 using SL, DDB and
MACRS.
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