Splish Brothers Inc. purchased factory equipment with an invoice price of $80,300. Other costs incurred were freight co installation wiring and foundation, $2.130; material and labor costs in testing equipment, $990; oil lubricants and supplie with equipment, $900 fire insurance policy covering equipment, $1,780. The equipment is estimated to have a $5,000 at the end of its 10 year useful service life
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.
Subject - account
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