Land: $9,397 Buildings: $20,722 Furnitures, Fixtures, and Equipment: $16,631 Other: $6,931 Accumulated Depreciation: $26,506 Net Property, Plant, and Equipment: 27,175 Sales: $134,752 a. Assuming a useful life of 10 years and no residual value, what is the expected amount of depreciation expense? answer to the nearest million. b. What is the fixed asset turnover ratio? answer to two decimal places. c. What is the average age of fixed assets? answer to two decimal places. d. What is depreciation expense as a percentage of net sales? answer to two decimal places.
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.
Land: $9,397
Buildings: $20,722
Furnitures, Fixtures, and Equipment: $16,631
Other: $6,931
Net Property, Plant, and Equipment: 27,175
Sales: $134,752
a. Assuming a useful life of 10 years and no residual value, what is the expected amount of depreciation expense? answer to the nearest million.
b. What is the fixed asset turnover ratio? answer to two decimal places.
c. What is the average age of fixed assets? answer to two decimal places.
d. What is depreciation expense as a percentage of net sales? answer to two decimal places.
Depreciation is the loss in the value of the asset caused due to its usage, wear and tear.
There are different methods available for computation of depreciation like, the straight line method, sum of digits, double declining method, units of production.
Depreciation under straight-line depreciation
= (Cost of the asset – salvage value) ÷ Estimated useful life of the asset
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