Units-of-Production Method A light truck is purchased on January 1 at a cost of $35,000. It is expected to serve for eight years and have a salvage value of $5,000. It is expected to be used for 100,000 miles over its eight-year useful life. Using the units-of-production method, calculate the depreciation expense for the first and third years of use if the truck is driven 20,000 miles in year 1 and 24,000 miles in year 3. Depreciation Expense Year 1 Year 3
Units-of-Production Method A light truck is purchased on January 1 at a cost of $35,000. It is expected to serve for eight years and have a salvage value of $5,000. It is expected to be used for 100,000 miles over its eight-year useful life. Using the units-of-production method, calculate the depreciation expense for the first and third years of use if the truck is driven 20,000 miles in year 1 and 24,000 miles in year 3. Depreciation Expense Year 1 Year 3
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 4EA: Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is...
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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.
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