On the first day of its fiscal year, Spearhead Company purchased a new computer systemfor a total cost of $50,000. The computer system is expected to have a life of 5 years witha residual value of $5,000. If the company uses the double-declining-balance method, itsdepreciation expense for this computer system in the first year will bea. $9,000.b. $10,000.c. $18,000.d. $20,000.
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 the first day of its fiscal year, Spearhead Company purchased a new computer system
for a total cost of $50,000. The computer system is expected to have a life of 5 years with
a residual value of $5,000. If the company uses the double-declining-balance method, its
depreciation expense for this computer system in the first year will be
a. $9,000.
b. $10,000.
c. $18,000.
d. $20,000.
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