Sheffield Cole Inc. acquired the following assets in January of 2023. Equipment, estimated useful life, 5 years; salvage value, $14,800 Building, estimated useful life, 30 years; no salvage value $560,800 $690,000 The equipment has been depreciated using the sum-of-the-years-diging method for the first 3 years for financial reporting purposes. In 2026, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated useful life or salvage value. It was also decided to change the total estimated useful life of the

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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.