January 1, a company purchases equipment for $305,000, $25,000 salvage value, and 20-year useful life. On December 31 of year 18, the company sells the equipment for $55,000. 1. Record annual depreciation at the time of disposal. 2. Record the disposal of the asset.
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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