A light truck is purchased on January 1 at a cost of $32,070. It is expected to serve for eight years and have a salvage value of $5,910. Calculate the depreciation expense for the first and third years of the truck’s life using the following methods. If required, round your answers to the nearest cent. Depreciation Expense Year 1 Year 3 1. Straight-line $ $ 2. Double-declining-balance $ $ 3. Sum-of-the-years'-digits $
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.
Straight-Line, Declining-Balance, and Sum-of-the-Years'-Digits Methods
A light truck is purchased on January 1 at a cost of $32,070. It is expected to serve for eight years and have a salvage value of $5,910. Calculate the
| Depreciation Expense | ||
| Year 1 | Year 3 | |
| 1. Straight-line | $ | $ |
| 2. Double-declining-balance | $ | $ |
| 3. Sum-of-the-years'-digits | $ |
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