Presented below is information related to Novak Manufacturing Corporation. Asset   Cost   Estimated Salvage   Estimated Life (in years) A   $44,900     $6,200       10   B   33,200     4,400       9   C   35,700     3,300       9   D   19,800     2,300       7   E   24,500     3,200       6   (a)     Compute the rate of depreciation per year to be applied to the plant assets under the composite method. (Round answer to 2 decimal place, e.g. 4.83%.) Composite rate   enter the composite rate in percentages rounded to 2 decimal places  %

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A: Under straight-line method  Depreciation per Year =( Historical cost - Salvage Value)/Useful Life

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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.