The cost of a Range Rover is 50,000 RO with an estimated life of 8 years and the salvage value is 10,000 RO. What is the book value at the end of second year using straight line depreciation? a. 30,000 RO b. 40,000 RO c. 45,000 RO d. 35,000 RO

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A: Computation:

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A:

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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.