On April 1, 2010, Sanders Construction paid $10,000 forequipment with an estimated useful life of 10 years and a residual value of $2,000. The company uses the double-declining-balance method of depreciation and applies the half-year convention to fractional periods. In 2011, theamount of depreciation expense to be recognized on thisequipment is:a. $1,600.b. $1,440.c. $1,280.d. Some other amount.
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.
On April 1, 2010, Sanders Construction paid $10,000 for
equipment with an estimated useful life of 10 years and a
residual value of $2,000. The company uses the double-
declining-balance method of
half-year convention to fractional periods. In 2011, the
amount of depreciation expense to be recognized on this
equipment is:
a. $1,600.
b. $1,440.
c. $1,280.
d. Some other amount.
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