91Ó°ÊÓ

Depreciation can be stated as the decline in the value of an asset over a useful period. All assets depreciate over time, except land, whose value increases with the passage of time. Among the various methods of depreciation, straight-line depreciation is considered to be the simplest and error-free method.

Calculation of annual depreciation

$\begin{array}{c}\text{¶Ù±ð±è°ù±ð³¦¾±²¹³Ù¾±´Ç²Ô e³æ±è±ð²Ô²õ±ð}=\frac{\text{°ä´Ç²õ³Ù o´Ú a²õ²õ±ð³Ù}−\text{³§²¹±ô±¹²¹²µ±ð v²¹±ô³Ü±ð}}{\text{±«²õ±ð´Ú³Ü±ô l¾±´Ú±ð}}\\ =\frac{\$8,000−\$1,000}{5}\\ =\$1,400\end{array}$

Calculating book value on January 1, 2018

$\begin{array}{c}\text{µþ´Ç´Ç°ì v²¹±ô³Ü±ð}=\text{°ä´Ç²õ³Ù o´Ú a²õ²õ±ð³Ù}−\left(2×\text{¶Ù±ð±è°ù±ð³¦¾±²¹³Ù¾±´Ç²Ô e³æ±è±ð²Ô²õ±ð}\right)\\ =\$8,000−\left(2×\$1,400\right)\\ =\$5,200\end{array}$

Calculating depreciation expense for 2018

$\begin{array}{c}\text{¶Ù±ð±è°ù±ð³¦¾±²¹³Ù¾±´Ç²Ô e³æ±è±ð²Ô²õ±ð}=\frac{\text{µþ´Ç´Ç°ì v²¹±ô³Ü±ð}−\text{·¡²õ³Ù¾±³¾²¹³Ù±ð»å v²¹±ô³Ü±ð}}{2}\\ =\frac{\$5,200−\$500}{2}\\ =\$2,350\end{array}$