During 2015, Sheridan Company purchased a building site for its proposed research and development laboratory at a cost of $59,000. Construction of the building was started in 2015. The building was completed on December 31, 2016, at a cost of $400,000 and was placed in service on January 2, 2017. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated residual value. Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2017 appears below.     Number of Projects   Salaries and Employee Benefits   Other Expenses (excluding Building Depreciation Charges) Completed projects with long-term benefits   20   $92,000   $46,000 Abandoned projects or projects that                benefit the current period   13   64,000   12,000 Projects in process—results indeterminate   7   47,000   9,000 Total   40   $203,000   $67,000 Upon recommendation of the research and development group, Sheridan Company acquired a patent for manufacturing rights at a cost of $92,000. The patent was acquired on April 1, 2016, and has an economic life of 10 years. If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements?           The company’s income statement for 2017. (Do not round intermediate calculations and round final answer to 0 decimal places, e.g. 5,275.) Sheridan Company Income Statement (Partial)     $                   The company’s balance sheet as of December 31, 2017. (Do not round intermediate calculations and round final answer to 0 decimal places, e.g. 5,275.) Sheridan Company Balance Sheet (Partial) For the Year Ended December 31, 2017           $

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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.