01 October 2013
A company buys an asset for Rs.5,000 that has a five-year lifespan and zero salvage value. The company uses straight-line depreciation, and the asset depreciates at a rate of Rs.1,000 per year.
In year one, depreciation will be Rs.1,000, as will accumulated depreciation, and carrying value of the asset will be Rs.4,000.
In year two, depreciation will be Rs.1,000, accumulated depreciation will be Rs.2,000 (Rs.1,000 from the current year + Rs.1,000 accumulated from previous years) and carrying value will be Rs.3,000.
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