Prepare schedule of depreciation under each method separately for 2015 and 2016 showing cost, depreciation, accumulated depreciation and book value. (each schedule)
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.
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Arif Habib Company purchased equipment on June 30th 2015 at a list price of Rs.600,000. paid transportation charges Rs.36000 and installation charges Rs.60000. Estimated life is 5 years and estimated salvage value Rs.56000. Following method were decided to use for calculating
Straight line method Reducing balance method (25%)
Required:
Prepare schedule of depreciation under each method separately for 2015 and 2016 showing cost, depreciation,
(each schedule)
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