Omaha Beef Company purchased a delivery truck for $66,000. The residual value at the end of an estimated eight-year service life is expected to be $8,000. The company uses straight-line depreciation for the first six years. In the seventh year, the company now believes the truck will be useful for a total of 10 years (four more years), and the residual value will remain at $8,000. Calculate depreciation expense for the seventh year.
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.
Omaha Beef Company purchased a delivery truck for $66,000. The residual value at the end of an estimated eight-year service life is expected to be $8,000. The company uses straight-line
Calculate depreciation expense for the seventh year.
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