E10-7 Brainiac Company purchased a delivery truck for $30,000 on January 1,2008. The truck has an expected salvage value of $2,000, ánd is expected to be driven 100,000 miles over its esti- mated useful life of 8 years. Actual miles driven were 15,000 in 2008 and 12,000 in 2009. Instructions (a) Compute depreciation expense for 2008 and 2009 using (1) the straight-lime method, (2) the units-of-activity(method, and (3) the double-declining balance method. (b) Assume that Brainiac uses the straight-line method. (1) Prepare the journal entry to record 2008 depreciation. (2) Show how the truck would be reported in thě December 31, 2008, balance sheet.
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.
E10-7 Brainiac Company purchased a delivery truck for $30,000 on January 1,2008. The truck has an expected salvage value of $2,000, ánd is expected to be driven 100,000 miles over its esti- mated useful life of 8 years. Actual miles driven were 15,000 in 2008 and 12,000 in 2009.
Instructions
(a) Compute
(b) Assume that Brainiac uses the straight-line method.
(1) Prepare the
(2) Show how the truck would be reported in thě December 31, 2008, balance sheet.
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