Final answer:
Depreciation of an asset held for use is calculated based on the asset's initial cost, its estimated useful life, and the selected depreciation method, which may include straight-line, declining balance, or units of production.
Step-by-step explanation:
Depreciation for an asset held for use is based on the asset's cost, its expected useful life, and the chosen method of depreciation. This accounting process allocates the cost of tangible assets over their useful lives and reflects the decrease in the asset's value as it is used. Typically, companies may use methods such as straight-line, declining balance, or units of production to determine the depreciation expense each year.
For example, if a company has a machine that cost $40,000 and expects it to last for 10 years with no salvage value, using the straight-line method, the annual depreciation would be $40,000 divided by 10, resulting in an annual depreciation expense of $4,000.