Depreciation and Capital Cost Allowance On its statement of financial position, CompuTech shows equipment purchased for $125,000 and a vehicle purchased for $35,000. The rate of depreciation (straight-line) and CCA for these non-current assets are as follows: Straight-line depreciation Capital cost allowance 1. Equipment 25% 40% 2. Vehicle 20% 30% Questions For the first five years of operation, calculate the amount of depreciation and CCA for the non-current assets.
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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