On January 1, 2022, Brent Tours purchased a new yacht for $2,100,000. The new yacht has an estimated useful life of nine years, and the residual value was estimated to be $75,000. Depreciation was computed on the sum-of-the-years'-digits method. What amount should be shown in Brent’s statement of financial position at December 31, 2022, net of accumulated depreciation, for this yacht? $Answer
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, 2022, Brent Tours purchased a new yacht for $2,100,000. The new yacht has an estimated useful life of nine years, and the residual value was estimated to be $75,000.
What amount should be shown in Brent’s
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