Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2017. The equipment has the following components. Component Cost Residual Value Estimated Useful Life A $70,000 $7,000 10 years B 50,000 5,000 5 years C 82,000 4,000 12 years Compute the depreciation expense for this equipment at December 31, 2017.
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.
Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2017. The equipment has the following components.
| Component | Cost | Residual Value | Estimated Useful Life |
| A | $70,000 | $7,000 | 10 years |
| B | 50,000 | 5,000 | 5 years |
| C | 82,000 | 4,000 | 12 years |
Compute the
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