From the following facts, for the units produced depreciation, what is: Given: COST - $ 40,000 RESIDUAL VALUE $ 5,000 Est. TOTAL UNITS PRODUCED FOR USEFUL LIFE CALCULATION $ 100,000 Units Produced per year: YEAR 1 - 20,000 YEAR 2 : 20,000 YEAR 2- 15,000 YEAR 3- 25,000 YEAR 4 - 32,000 YEAR 5 - 17,000 YEAR 6: - 15,000
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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From the following facts, for the units produced
Given: COST - $ 40,000 RESIDUAL VALUE $ 5,000 Est. TOTAL UNITS PRODUCED FOR USEFUL LIFE CALCULATION $ 100,000
Units Produced per year: YEAR 1 - 20,000
YEAR 2 : 20,000 YEAR 2- 15,000 YEAR 3- 25,000 YEAR 4 - 32,000 YEAR 5 - 17,000 YEAR 6: - 15,000
Required: Book value at the end of year 3
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