Butler Buildings purchased semi-automated assembly and riveting robotics equipment for constructing its modular warehouse buildings. The first cost was $475,000 and installation costs were $75,000; life is estimated at 10 years with a salvage of 15% of first cost. Use the SL method to determine (a) annual recovery rate, (b) annual depreciation, (c) book value after 5 years, and(d) book value after 10 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.
Butler Buildings purchased semi-automated assembly and riveting robotics equipment for constructing its modular warehouse buildings. The first cost was $475,000 and installation costs were $75,000; life is estimated at 10 years with a salvage of 15% of first cost. Use the SL method to determine (a) annual recovery rate, (b) annual
(d) book value after 10 years.
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