Financial Statements: depreciation for the first three years
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Based on the depreciation disclosure in the financial statements for a selected business, how would depreciation on a $100,000 piece of equipment be calculated for the first three years? Why is the method used more accurate than any of the other available methods?
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Solution Summary
In a 372 word discussion, the response explains about various methods of depreciation, and the issues that can arise for selecting one over another.
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Depreciation for equipment is calculated using any one of several methods, but the theory behind depreciation is to match the expense of the equipment wearing out against the production of revenue.
In using that concept, the amount of depreciation would first be determined by the expected useful life of the asset. It could be that a single piece of equipment would be in service for 3 years, 13 years or an unknown number of years. It very much depends on the type of asset and the amount of use. Another factor which could influence the useful ...
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