Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $5,000 and is expected to be driven for five years. Montello uses the double-declining-balance depreciation method. Calculate the year one depreciation expense. What is the year one book value? Calculate the year three depreciation expense. What is the year three book value? In what year is a "plug" amount used instead of the formula to calculate the depreciation expense? Year _____
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.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $5,000 and is expected to be driven for five years. Montello uses the double-declining-balance
- Calculate the year one depreciation expense.
- What is the year one book value?
- Calculate the year three depreciation expense.
- What is the year three book value?
- In what year is a "plug" amount used instead of the formula to calculate the depreciation expense? Year _____
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