A truck was acquired on july 1, 2014, at a cost of $162,000. The truck had a six-year useful life and an estimated salvage value of $18,000. The straight line method of depreciation was used. On January 1, 2017, the useful life of the truck was extended for additional two years depreciation for annual adjustment purposes, expense is calculated for each month the asset is owned. The fiscal year end is December 31. Instructions Prepare the appropriate entries for December 31, 2017.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A truck was acquired on july 1, 2014, at a cost of $162,000. The truck had a six-year useful life and an estimated salvage value of $18,000. The
Instructions
Prepare the appropriate entries for December 31, 2017.
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