Equipment was purchased for R.O.17,000 on January 1, 2010. Freight charges amounted to R.O.700 and there was a cost of R.O.2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a R.O.3,000 residual value at the end of its 5-year useful life. What is the amount of depreciation expense at December 31, 2011, if the straight-line method of depreciation is used? Select one: a. R.O.2,860 b. R.O.6,680 O CRO.3.340 O d. R.O.5.72o
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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