8. ABC Company purchased an asset on January 1, 2016, for $10,000. The asset was expected to have a ten-year life and a $1,000 salvage value. The company uses the straight-line method of depreciation. On January 1, 2018, the company made a major repair to the asset of $5,000, extending its life. The asset is expected to last ten years from January 1, 2018. Calculate the amount of depreciation for 2018.
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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Calculate the amount of depreciation for 2018.
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