Hi can you explain to me how to find the depreciation expense for the second year? Purchase price for computer: $27,000 Est. Useful life: 6 years Residual value: $1,000 The company uses double-declining-balance method. What I did- To find the depreciation rate I did 2/6= .333 I took $27,000 X .333 got the depreciation exp. of 8,910 Boom value of first year of $18,090. Year 2 beginning book value is $18,090 X .333 and got the SECOND YEAR DEPRECIATION EXPENSE of $5,969. But that’s not an option. Can you tell me where my calculations have gone wrong? My answer options are: $7,500 $6,000 $5,250 $8,250 Thanks For the
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.
Assets: Assets are the resources of an organization used for the purpose of business operations. They include both current and non-current assets. The assets which are used or are converted into cash within a year or less are called current assets and assets which are used for long term i.e. more than a year are called non-current or long term assets.
Depreciation: It is the value of the asset diminished for its use in the business operations. Thus, a portion of the value used in a year is treated as expense and is charged against the revenues.
Useful life: It is the period during which the asset is expected to work or is used for the purpose of business operations.
Salvage value: It is the expected value that can be fetched for an asset at the end of its useful like.
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