On January 1, 20x1, DEVIOUS CROOKED Co. purchased the following assets and decided to depreciate them as a single unit: Cost Residual value Useful life Machine tools 80,000 4,000 3 years Meters 64,000 2,000 5 years Returnable containers 120,000 - 6 years What is the composite life?
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, 20x1, DEVIOUS CROOKED Co. purchased the following assets and decided to
Cost Residual value Useful life
Machine tools 80,000 4,000 3 years
Meters 64,000 2,000 5 years
Returnable containers 120,000 - 6 years
What is the composite life?
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