The pertinent information about a piece of construction equipment follows: cost $180,000 Estimated Useful Life 200,000 Miles Residual (salvage) value $20,000 Placed in service 1/2/2015 Year 1 output = 37,000 miles Year 2 output= 51000 miles Compute the first two years depreciation using the units of output method.
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 pertinent information about a piece of construction equipment follows:
cost $180,000
Estimated Useful Life 200,000 Miles
Residual (salvage) value $20,000
Placed in service 1/2/2015
Year 1 output = 37,000 miles
Year 2 output= 51000 miles
Compute the first two years
Calculate the amount of depreciable asset and depreciation per mile:
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