Archive for: January, 2021

Does Accumulated Depreciation Affect Net Income?

It is recorded with a debit to the depreciation expense account and a credit to the accumulated depreciation contra asset account. Another difference is that the depreciation expense for an asset is halted when the asset is sold, while accumulated depreciation is reversed when the asset is sold. Accumulated depreciation is the total amount of…

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Step Costs: Definition, Significance, and Examples

If it’s just a small increase in volume, management may try to squeeze out extra productivity from existing operations, instead of incurring stepped-up costs. If you decide to sell the property, this step-up in basis will significantly reduce your capital gains tax. Instead of paying capital gains taxes on the difference between $100,00 and the…

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