A new electric saw for cutting small pieces of lumber in a furniture manufacturing plant has a cost basis of $ 4,000 and a 10 - year depreciable life. The estimated salvage value of the saw is $ 100 at the end of 10 years. Using the Modified Accelerated Cost Recovery System, compute A) The depreciation charge in the 3 rd year B) The book value after 3 years

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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.