Ivanhoe Deliveries acquired a truck at a cost of $55,040 on January 1, 2014. The truck is expected to have a salvage value of $6,880 at the end of its 4-year useful life. Ivanhoe uses the straight-line method. Prepare the journal entry to record annual depreciation for 2015. (Credit occount titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit
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.
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