A construction company purchases $50,000 worth of equipment on July 1, 2014. The company estimates that the equipment will have a salvage value of $5,000 and its useful life will be 9 years. The company’s accounting year ends on December 31 of each year. What is the total depreciation for the equipment at the end of 2014? a. $ 5,000 b. $ 5,556 c. $ 10,000 d. $ 2,500 e. $ 2,778
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.
A construction company purchases $50,000 worth of equipment on July 1, 2014. The company estimates that the equipment will have a salvage value of $5,000 and its useful life will be 9 years. The company’s accounting year ends on December 31 of each year. What is the total
a. $ 5,000
b. $ 5,556
c. $ 10,000
d. $ 2,500
e. $ 2,778
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