My text book is Hospitality Industry Financial Accounting (4th edition). I am in chapter 11 -- PROPERTY, EQUIPMENT, and OTHER ASSETS now. Problem 12 asks me to Calculate the first year's depreciation under each of the following methods: 1. Straight-line. 2. Units of production, assuming the bus traveled 15,000 miles in year 1. 3. Sum-of-the-years' digits. 4. Double declining balance. The scenario is "The Tree Line Inn has purchased a shuttle bus to transport guests to and from a local ski lodge. The cost of the bus is $40,000; its salvage value is $4,000; and its life is five years with expected usable mileage of 100,000."
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.
My text book is Hospitality Industry Financial Accounting (4th edition). I am in chapter 11 -- PROPERTY, EQUIPMENT, and OTHER ASSETS now.
Problem 12 asks me to Calculate the first year's
1. Straight-line.
2. Units of production, assuming the bus traveled 15,000 miles in year 1.
3. Sum-of-the-years' digits.
4. Double declining balance.
The scenario is "The Tree Line Inn has purchased a shuttle bus to transport guests to and from a local ski lodge. The cost of the bus is $40,000; its salvage value is $4,000; and its life is five years with expected usable mileage of 100,000."
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