A plant asset was purchased for P19,000 on January 1, 2011 with a residual value and useful life of five year In 2014, the total useful life is re-estimated to be seven years and the estimated salvage value is assumed to be zero. Sum of years' digits depreciation is used. What is the depreciation expense in 2014?
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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