On January 1, 2019, Pharoah Corporation acquired equipment at a cost of $768000. Pharoah adopted the sum-of-the-years’-digits method of depreciation for this equipment and had been recording depreciation over an estimated life of 8 years, with no residual value. At the beginning of 2022, a decision was made to change to the straight-line method of
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 January 1, 2019, Pharoah Corporation acquired equipment at a cost of $768000. Pharoah adopted the sum-of-the-years’-digits method of
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
