A recent annual report for the Depp Company contained the following note: Property, plant, and equipment is
Question:
A recent annual report for the Depp Company contained the following note:
Property, plant, and equipment is stated at cost, less allowance for depreciation. Depreciation expense is determined principally by the straight-line method. The annual rates of depreciation are 4 percent to 10 percent for buildings and improvements and 10 percent to 40 percent for machinery and equipment.
Required:
1. What is the range of expected lives for buildings and improvements?
2. Explain why Depp Company depreciates the cost of its containers instead of including the total in cost of goods sold in the year the product is sold.
Step by Step Answer:
Req 1 The use of a depreciation percentage may appea...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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