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Answer :
Final answer:
Even when fully depreciated, assets should remain on a company's balance sheet. They've simply had their cost fully allocated over their service years. They are only removed when no longer in use.
Explanation:
You should advise Pete that, even though the assets are fully depreciated, they should remain on the company's balance sheet. A fully depreciated asset has already had its cost completely allocated across the years it was in service. However, it still has a place on the balance sheet because it's an asset that the company still owns and uses, even if its cost isn't contributing to the company's overall value any longer. It should remain on the balance sheet at its salvage value (which could be zero) until it is sold or discarded. The only time a fully depreciated asset would be removed from the balance sheet is when it's no longer in use.
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The advice you would give to your friend is : Despite assets do depreciate he should continue to report the assets as well as their accumulated depreciation on the balance sheet.
What is depreciation?
Depreciation can be defined as how assets tend to decrease in value over time which is why depreciation is often calculated using this formula
Depreciation = Cost of assets = Residual value/ Useful life of assets
Your friend should continue to record the assets and the accumulated depreciation on the balance sheet as this will help to show that the assets are still functioning or in use.
Therefore the depreciation is when assets reduce in value.
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