Lawn & Order, Inc., purchased a truck on January 1, Year 1, at a cost of $109,000. The truck has an estimated useful life of 5 years or 116,000 miles. The estimated salvage value is $21,000. In Year 1, the truck was driven 16,000 miles. In Year 2, the truck was driven 22,000 miles. Accumulated Depreciation on the balance sheet using straight-line depreciation at December 31, Year 2, after two years of use, is (rounded to the nearest dollar) ______.
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.
Lawn & Order, Inc., purchased a truck on January 1, Year 1, at a cost of $109,000. The truck has an estimated useful life of 5 years or 116,000 miles. The estimated salvage value is $21,000. In Year 1, the truck was driven 16,000 miles. In Year 2, the truck was driven 22,000 miles.
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