A tool company purchased equipment at a cost of $100,000 in January five years ago. As of January 1 of the current year, depreciation of $45,000 had been recorded on this asset. Depreciation expense for the current year is $5,000. After the adjustments are recorded and posted at December 31 of the current year, what are the balances for depreciation expense and accumulated depreciation? depreciation expense: $5,000; accumulated depreciation: $45,000 depreciation expense: $5,000; accumulated depreciation: $50,000 depreciation expense: $45,000; accumulated depreciation: $45,000 depreciation expense: $45,000; accumulated depreciation: $50,000
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 tool company purchased equipment at a cost of $100,000 in January five years ago. As of January 1 of the current year,
depreciation expense: $5,000; accumulated depreciation: $45,000
depreciation expense: $5,000; accumulated depreciation: $50,000
depreciation expense: $45,000; accumulated depreciation: $45,000
depreciation expense: $45,000; accumulated depreciation: $50,000
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