depreciation, how to compute depreciation while undergoing FA

Question

Accepted Answer

Depreciation is calculated by dividing the cost of an asset by its useful life, taking into account salvage value and depreciation method.

Depreciation is a non-cash expense that reflects the decrease in value of an asset over time.
Common methods of calculating depreciation include straight-line, double declining balance, and units of production.
To calculate straight-line depreciation, subtract the salvage value from the cost of the asset and divide by the useful life.
For example, if a machine costs $10,000, has a salvage value of $2,000, and a useful life of 5 years, the annual depreciation would be ($10,000 - $2,000) / 5 = $1,600.
Depreciation is important for financial analysis as it impacts the company's profitability and taxes.

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