Finx, Inc., purchased a truck for $35,000. The truck is expected to be driven 15,000 miles per yearover a five-year period and then sold for approximately $5,000. Determine depreciation for thefirst year of the truck’s useful life by the straight-line and units-of-output methods if the truck isactually driven 16,000 miles.
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.
Finx, Inc., purchased a truck for $35,000. The truck is expected to be driven 15,000 miles per year
over a five-year period and then sold for approximately $5,000. Determine
first year of the truck’s useful life by the straight-line and units-of-output methods if the truck is
actually driven 16,000 miles.
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