A commercial generator with an unadjusted basis of $50,000 is straight-line depreciated over a 5-year period. The asset will have an AOC of $35,000 and a salvage value of $10,000. The book value at the end of year 3 will be closest to: (a) $8000 (b) $20,000 (c) $24,000 (d) $26,000
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.
A commercial generator with an unadjusted basis
of $50,000 is straight-line
5-year period. The asset will have an AOC of
$35,000 and a salvage value of $10,000. The book
value at the end of year 3 will be closest to:
(a) $8000 (b) $20,000
(c) $24,000 (d) $26,000
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