Leonard’s Corp purchased a delivery van on July 1, 2005 for P1,250,000 plus prepaid insurance for one year amounting to P5,000. The van has an estimated useful life of 10 years and a zero residual value. Using the information above, make the depreciation entry for Dec 31, 2006. Post to T-Accounts the balance of delivery van (starting with 2005 balance), the accumulated depreciation (starts 2005) and the 2006 adjusting entry. The depreciation expense (no balance to be forwarded) and the 2006 adjusting entry. 1. What was the depreciation expense in the 2006 Income statement? 2. What was the book value of the delivery van in the 2006 balance sheet?
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.
Leonard’s Corp purchased a delivery van on July 1, 2005 for P1,250,000 plus prepaid insurance for one year amounting to P5,000. The van has an estimated useful life of 10 years and a zero residual value.
Using the information above, make the
1. What was the depreciation expense in the 2006 Income statement?
2. What was the book value of the delivery van in the 2006
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
