Freedom Co. purchased a new machine on July 2, 2019, at a total installed cost of $132,000. The machine has an estimated life of five years and an estimated salvage value of $18,000. Calculate the depreciation expense for each year of the asset's life using Double-declining-balance depreciation. Year Depreciation Expense 1 $52,800 2 $31,680 3 $19,008 4 5
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.
Freedom Co. purchased a new machine on July 2, 2019, at a total installed cost of $132,000. The machine has an estimated life of five years and an estimated salvage value of $18,000.
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Depreciation is considered as an expense charge on the value of the Asset. It can be calculated by using different methods state line method, the double decline method, the sum of the year's digits method, etc.
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