EXCELSIOR Company started its operations on January 1, 2019> in preparing the financial statements for the year ended December 31, 2022, the entity used the following original cost and useful life for the property, plant and equipment : Building - Orig. cost 30,000 Useful life 15 years Machinery - Orig. cost 15,000 Useful life 10 years Equipment - Orig. cost 35,000 Useful life 7 years On Jan. 1, 2022, the company determined that the remaining useful life is 10 years for the building, 5 years for the machinery and 4 years for the equipment. The company used the
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.
EXCELSIOR Company started its operations on January 1, 2019> in preparing the financial statements for the year ended December 31, 2022, the entity used the following original cost and useful life for the property, plant and equipment : Building - Orig. cost 30,000 Useful life 15 years Machinery - Orig. cost 15,000 Useful life 10 years Equipment - Orig. cost 35,000 Useful life 7 years On Jan. 1, 2022, the company determined that the remaining useful life is 10 years for the building, 5 years for the machinery and 4 years for the equipment. The company used the
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