Cheers Delivery Company purchased a new delivery truck for $48,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2019 and 16,000 miles in 2020. Cheers computes depreciation expense to the nearest whole month. See attached questions.
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.
Cheers Delivery Company purchased a new delivery truck for $48,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2019 and 16,000 miles in 2020. Cheers computes
See attached questions.
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