Irons Delivery Inc. purchased a new delivery truck for $45,000 on January 1, 2013. The truck is expected to have a $3,000 residual value at the end of its 5-year useful life. Irons uses the units-of-production method of depreciation. Irons expects the truck to run for 160,000 miles. The actual miles driven in 2013 and 2014 were 40,000 and 36,000, respectively. Required: Hide Prepare the journal entry to record depreciation expense for 2013 and 2014. 2013 Dec. 31 (Record units-of-production depreciation expense) 2014 Dec. 31 (Record units-of-production depreciation expense)
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.
Irons Delivery Inc. purchased a new delivery truck for $45,000 on January 1, 2013. The truck is expected to have a $3,000 residual value at the end of its 5-year useful life. Irons uses the units-of-production method of
Required:
Prepare the
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