The cost of an asset is RO 50,000 and has an estimated use value of 20,000 hours. During the first year the equipment used 4000 hours. In the second year the equipment used 8000 hours. The salvage value is RO 4000. The depreciation for the first year by using units of production method is
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 cost of an asset is RO 50,000 and has an estimated use value of 20,000 hours. During the first year the equipment used 4000 hours. In the second year the equipment used 8000 hours. The salvage value is RO 4000. The
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