Happy Company owned a power plant which consisted of the following assets all acquired at the beginning of current year. Residual value Useful life in years Cost Building Machinery Equipment 20 6,100,000 2,550,000 1,030,000 100,000 50,000 30,000 10 Required: a. Compute the composite rate. b. Compute the composite life. c. Prepare journal entry to record the depreciation for the current year following the composite method.
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.
How much should be recorded as
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