The FOURX Corp. has purchased $50,000 of experimental equipment. The anticipated salvage value is $5000 at the end of its 5-year depreciable life. This profitable corporation is considering two methods of depreciation: straight-line and double declining balance. If it uses 10% interest in its comparison, which method do you recommend? Use a spreadsheet to develop your solution.
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 FOURX Corp. has purchased $50,000 of experimental equipment. The anticipated salvage value is $5000 at the end of its 5-year
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