A new machine costs $160 000, has a useful life of 10 years, and can be sold for $15 000 at the end of its useful life. It is expected that $5000 will be spent to dismantle and remove the machine at the end of its useful life. Determine the straight-line depreciation schedule for this machine. Solve for the Accumulated Depreciation per year and Book Value at the end of each year and summarize using a table by: a) Straight Line Method, b) Sinking Fund Method (i=10%), c) Sum-of-Years-Method

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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.