ABC Corporation purchased a piece of equipment for $50,000. The equipment has a useful life of 5 years and a salvage value of $5,000. The company uses the straight-line depreciation method. Calculate the annual depreciation expense for the first three years.
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.
ABC Corporation purchased a piece of equipment for $50,000. The equipment has a useful life of 5 years and a salvage value of $5,000. The company uses the
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