On April 2, Year 1, Victor, Incorporated acquired a new piece of filtering equipment. The cost of the equipment was $200,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years. Victor uses a calendar year-end for financial reporting Assume that in its financial statements, Victor uses straight-ane depreciation and the half-year convention. Depreciation recognized on this equipment in Year 1 and Year 2 will be Multiple Choice $20,000 in Year 1 and $45,000 in Year 2 $33,750 In Year 1 and $37,500 in Year 2 $50,000 in Year 1 and $37,500 in Year 2 $22.500 In Year 1 and $45,000 in Year 2

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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.