Blue-City, Inc., purchased a building for Rs 900,000. Straight-line depreciation was used for each of the first five years using the following assumptions: 20-year estimated useful life, with a residual value of Rs 100,000. Calculate the annual depreciation for the first five years that Blue-City owned the building. Calculate the book value of the building at the end of the five year. c. Calculate the depreciation and book value if company uses declining-balance method.
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.
Blue-City, Inc., purchased a building for Rs 900,000. Straight-line
- Calculate the annual depreciation for the first five years that Blue-City owned the building.
- Calculate the book value of the building at the end of the five year.
- c. Calculate the depreciation and book value if company uses declining-balance method.
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