Irons Delivery Inc. purchased a new delivery truck for $40, 300 on January 1, 2023. The truck is expected to have a $2,000 residual value at the end of its 5-year useful life. Irons uses the double - declining - balance method of depreciation. Prepare the journal entry to record depreciation expense for 2023 and 2024. If an amount box does not require an entry, leave it blank.

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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.