Kap Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2016. The change affects machinery purchased at the beginning of 2014 at a cost of $36,000. The machinery has an estimated life of five years and an estimated residual value of $1,800. What is Kap’s 2016 depreciation expense? a. $4,200 b. $4,560 c. $4,800 d. $7,920
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.
Kap Company switched from the sum-of-the-years-digits
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