Laurier Ltd. purchased a delivery truck on May 1, 2021, at a cost of $77,160. The truck is expected to have a residual value of $8,680 at the end of its 4-year useful life. Laurier has a December 31 year end and uses the diminishing-balance method to calculate depreciation. Assume the depreciation rate is equal to one time the straight-line rate. Calculate the accumulated depreciation balance at December 31, 2022.

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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.