A pump cost $1000 and has a salvage value of $100 after a life of 5 years. Using the straight-line depreciation method, determine: a. The depreciation in the first year. b. The book value after 5 years. c. The book value after 4 years if the salvage was only $50.
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 pump cost $1000 and has a salvage value of $100 after a life of 5 years. Using the
a. The depreciation in the first year.
b. The book value after 5 years.
c. The book value after 4 years if the salvage was only $50.
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