On April1, 2021,DG Corporation purchased an equipment with cost of 150000. The company estimate that it has a useful life of five years with a residual value of 25000 at the end of it's economic life. On December 31, 2021, how much will be the depreciation to be by the company assuming the firm employs the straight-line 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.
On April1, 2021,DG Corporation purchased an equipment with cost of 150000. The company estimate that it has a useful life of five years with a residual value of 25000 at the end of it's economic life. On December 31, 2021, how much will be the
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