A schedule of machinery owned by Crane Company is presented below: Estimated Estimated Total Cost Salvage Value Life in Years Machine X $584000 $38000 14 Machine Y 780000 78000 10 Machine Z 280000 58000 6 Crane computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is A.)13.64 B.)10.11 C.)8.42 D.)8.89
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 schedule of machinery owned by Crane Company is presented below:
|
|
|
Estimated |
|
Estimated |
|
|
Total Cost |
|
Salvage Value |
|
Life in Years |
|
| Machine X |
$584000 |
|
$38000 |
|
14 |
| Machine Y |
780000 |
|
78000 |
|
10 |
| Machine Z |
280000 |
|
58000 |
|
6 |
Crane computes
The composite rate of depreciation (in percent) for these assets is
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