Problems 7-12 use the following information: A firm purchased a new piece of equipment with an estimated useful life of five years. The cost of the equipment was $55,000. The salvage value is estimated to by $5,000 at the end of year 5. Using the Double-Declining Balance method of depreciation, what is the value of "alpha"? A. 0.5 B. 0.4 C. 0.2 D. 0 .8 E. 0.6
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.
Problems 7-12 use the following information: A firm purchased a new piece of equipment with an estimated useful life of five years. The cost of the equipment was $55,000. The salvage value is estimated to by $5,000 at the end of year 5.
Using the Double-Declining Balance method of
A.
0.5
B.
0.4
C.
0.2
D.
0
.8
E.
0.6
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