Calculate the depreciation expense for each of the 5 years of the asset’s useful life.
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.
On January 1, 2015, WinPod Limited purchased a new vehicle for $65,000. It is estimated that the vehicle will have an $3,000 residual value at the end of its 5-year useful service life. WinPod has a year-end of December 31 and uses the double diminishing-balance method of
Instructions:
Calculate the depreciation expense for each of the 5 years of the asset’s useful life.
Double diminishing balance method:- Under this method, companies depreciate their assets faster and more at the starting and less at the ending. This will result in claiming more depreciation expenses quickly.
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