Determine the rate of depreciation, the total depreciation up to end of the 8th year, and the book value at the end of 8 years for an asset that costs $15,000 now and has an estimated scrap value of $2,000 at the end of 10 years by (a) declining balance method and (b) the double declining balance method
Determine the rate of depreciation, the total depreciation up to end of the 8th year, and the book value at the end of 8 years for an asset that costs $15,000 now and has an estimated scrap value of $2,000 at the end of 10 years by (a) declining balance method and (b) the double declining balance method
Chapter9: Capital Budgeting And Cash Flow Analysis
Section9.A: Depreciation
Problem 1P
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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.
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