LeMonde Coal Company buys a coal mine for $1 Million. The mine has a residual value of $200,000, and is expected to yield 100,000 tonnes of coal. If LeMonde Coal Company extracts 5000 tonnes of coal this year, calculate the amount to be credited to accumulated amortization.
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.
- LeMonde Coal Company buys a coal mine for $1 Million. The mine has a residual value of $200,000, and is expected to yield 100,000 tonnes of coal.
If LeMonde Coal Company extracts 5000 tonnes of coal this year, calculate the amount to be credited to accumulated amortization.
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