Haliburton Bakery acquires a delivery truck for $80,000 and anticipates using it for eight years, at which time it will have logged 500.000 kilometres. Currently, market conditions suggest that a used truck with 500.000 kilometres on the odometer sells for $5,000. The company anticipates using the truck for about the same amount each year and therefore believes that the straight-line method is appropriate. After using and depreciating the truck for three years, management believes that the truck will remain useful for a total of 10 years, after which the residual value will be $1,500. Requirement Compute the amount of depreciation in the third and fourth years. (Round your final answer to the nearest whole dollar) Year Truck value Residual value 3 L Depreciation year 1.3 Years of service Depreciation amount

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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.