Hampton Inc. purchased a machine to use in its business. The machine is estimated to have an economic life of 10 (ten) years before it becomes obsolete. The company expects to use the machine for 4 (four) years before it sells the machine to another company. Hampton uses the straight-line depreciation method. Question: How many years should Hampton depreciate this asset over? (4,7,10, or 14)
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.
Hampton Inc. purchased a machine to use in its business. The machine is estimated to have an economic life of 10 (ten) years before it becomes obsolete. The company expects to use the machine for 4 (four) years before it sells the machine to another company.
Hampton uses the
Question: How many years should Hampton
(4,7,10, or 14)
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