Masterson Supply purchased a small storage building for $20,000 to be used over a five-year period. The building has no residual value. Early in the fourth year, the storage building burned down. Record the retirement of the remaining book value of the storage building.
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.
Masterson Supply purchased a small storage building for $20,000 to be used over a five-year period. The building has no residual value. Early in the fourth year, the storage building burned down. Record the retirement of the remaining book value of the storage building.
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