Farmacy Stuff bought a patent for a great medical cure for $15,000 on May 1, 2014. The patent has a remaining life of 5 years and will be amortized using the straight-line method. Farmacy closes its books on December 31, 2014. Journalize the entry to record amortization for 2014
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.
Farmacy Stuff bought a patent for a great medical cure for $15,000 on May 1, 2014. The patent has a remaining life of 5 years and will be amortized using the straight-line method. Farmacy closes its books on December 31, 2014.
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