Crane Ltd. purchased equipment on January 1, 2015 at a cost of $171,380. The equipment has an estimated useful life of 9 years and a residual value of $9,650. Crane realized that there was a declining demand for the product being produced by the equipment. Given this indicator of possible impairment, management determined that the recoverable amount of the asset on December 31, 2018 was $95,260. The company uses the straight-line method of depreciation. (a)     Calculate the annual depreciation and the carrying amount at December 31, 2018. Annual depreciation   $  Carrying amount   $

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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.