Jack's, a popular pizza hang-out, has a thriving delivery business. Jack's has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows: Accumulated Estimated Depr.-Beg. Miles Operated Car Cost Salvage Value Life in Miles of the Year During Year 1 $21,000 $3,000 75,000 $2,520 20,000 18,000 2,400 60,000 2,340 22,000 23,500 2,500 70,000 2,000 19,000 3.
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.
Mileage
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