On January 1, 2016, Wasson Company purchased a delivery truck costing $40,000. The truck has an estimated 6-year life and a $4,000 residual value. Wason uses the units-of-production depreciation method and Wasson estimates that the truck will be driven 100,000 miles over its life. What is the truck's book value as of December 31, 2017 assuming the vehicle was driven 10,000 miles during 2016 and 18,000 miles during 2017$
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.
On January 1, 2016, Wasson Company purchased a delivery truck costing $40,000. The truck has an estimated 6-year life and a $4,000 residual value. Wason uses the
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