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Depreciation And Sale Of Asset - College Paper

Depreciation And Sale Of Asset

Depreciation is the decline in the future economic benefits of a depreciable non-current asset through wear and tear and obsolescence. It is an allocation process. It can be calculated by two main methods, each reflecting in a distinct prospect in the way the asset is used. Depreciation is to be treated as an estimated expense that does not set aside cash for the replacement of a non-current asset. In determining the cost of acquisition of the lathes, any capital expenditure made must be added to the purchase price of the lathes. This amount will be considered as the historical cost and will be used in calculating the depreciation expense
Depreciation is the allocation of the cost of ...

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potential to provide future economic benefit. There are three factors that contribute to this decline. They are, the deterioration of a non-current asset due to the use of it, technical obsolescence, whereby certain assets become out of date due to technical innovations and improvements on a comparative basis and the final, commercial obsolescence which is the process of certain non-current assets becoming redundant as the demands fall for the goods or service previously provided by the asset
Depreciation allocates the assets cost or depreciable amount over the estimated useful life of the asset to the entity. It is not a process of asset valuation. The cost of the asset less the accumulated depreciation is not intended to give the current market value of the asset as the asset purchased is not intended for re-sale but use in the business.
There are two methods of depreciating an asset, the straight-line method, and the reducing balance method. The straight-line method of ...

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Depreciation And Sale Of Asset. (2008, November 17). Retrieved November 23, 2024, from http://www.essayworld.com/essays/Depreciation-And-Sale-Of-Asset/93228

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PAPER DETAILS

Added: 11/17/2008 10:59:40 AM
Category: Miscellaneous
Type: Premium Paper
Words: 962
Pages: 4

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