Question

step by step on how to calculate assets disposal and depreciation in details

Answer 1

A disposal value or written down value of an asset is calculated by reducing the book value of an asset by the yearly depreciation calculated. Hence, only the net value after derpreciation is factored in the books.

As asset is estimated to have a life exceeding one or more years and they're depreciated for the wear & tear based on their estimated life.

Let's say there's an asset worth 10,000 $ with an estimated life of 10 years. Each year, under straight-line method, the asset value will be reduced by 1,000 $ (10,000 / 10).

For depreciation calculation, stratight line method is usually followed. It's a simpler accounting method to calculate and present in the books.

In United States, tax calculation of depreciation is done under the Modified Accelerated Cost Recovery System (MACRS). Under this system, the capitalized cost of tangible assets is recovered over the estimated life of the asset by annual deductions for depreciation. MACRS depreciation table is followed for it's calculation.