An asset was purchased by XYZ company for 750,000. It had an estimated residual value of 150,000 and an estimated useful life of 10 years. After 5 years of use, the estimated residual value is revised to 120,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would be
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.
An asset was purchased by XYZ company for 750,000. It had an estimated residual value of 150,000 and an estimated useful life of 10 years. After 5 years of use, the estimated residual value is revised to 120,000 but the estimated useful life is unchanged. Assuming straight-line
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