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24 September, 13:22

Which of the following estimates are required when calculating depreciation expense? 1. Depreciation rate 2. Useful life 3. Expected maintenance costs 4. Salvage value

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  1. 24 September, 13:47
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    These are required to calculate a depreciation expense on an asset:

    1. Depreciation rate - the speed at which an asset becomes obsolete. Some assets depreciate faster than others, for example cars lose value more rapidly than houses.

    2. Useful life - is the amount of time that the asset is expected to provide economic benefits for the firm. In the case of a computer, for example, average useful life is around 3 to 5 years depending on the company.

    4. Salvage value - this is the residual value that the asset will have once its useful life has run out. A company needs this value to calculate the depreciable amount (which equals initial value - salvage value).
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