Pharoah Company purchased a delivery truck for $36,000 on July 1, 2022. The truck has an expected salvage value of $4,000 and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2022 and 12,000 in 2023. Pharoah uses the straight-line method of depreciation. 1. Compute depreciation expense for 2022 and 2023 via straight-line method. 2. Prepare the journal entry to record 2022 depreciation 3. Prepare the journal entry to record 2023 depreciation. 4. Show how the truck would be reported in the December 3, 2023, 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.
Pharoah Company purchased a delivery truck for $36,000 on July 1, 2022. The truck has an expected salvage value of $4,000 and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2022 and 12,000 in 2023. Pharoah uses the straight-line method of
1. Compute depreciation expense for 2022 and 2023 via straight-line method.
2. Prepare the
3. Prepare the journal entry to record 2023 depreciation.
4. Show how the truck would be reported in the December 3, 2023,
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