An asset was purchased for $51,000 and originally estimated to have a useful life of 10 years with a residual value of $3,700. After 2 years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $1,480. a. Determine the amount of the annual depreciation for the first 2 years. b. Determine the book value at the end of Year 2. c. Determine the depreciation expense for each of the remaining years after revision.
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.
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