The balance in the equipment account is $3,150,000, and the balance in the accumulated depreciation— equipment account is $2,075,000.a. What is the book value of the equipment?b. Does the balance in the accumulated depreciation account mean that theequipment’s loss of value is $2,075,000? Explain.
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.
The balance in the equipment account is $3,150,000, and the balance in the
a. What is the book value of the equipment?
b. Does the balance in the accumulated depreciation account mean that the
equipment’s loss of value is $2,075,000? Explain.
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