Presented here are selected transactions for Ivanhoe Limited for 2018. Ivanhoe uses straight-line depreciation and records adjusting entries annually. Jan. 1 Sept. 1 Dec. 30 Sold a delivery truck for $19,480 cash. The truck cost $63,080 when it was purchased on January 1, 2015, and was depreciated based on a four-year useful life with a $5,600 residual value. Sold computers that were purchased on January 1, 2016. They cost $11,754 and had a useful life of three years with no residual value. The computers were sold for $450 cash. Retired equipment that was purchased on January 1, 2009. The equipment cost $148,100 and had a useful life of 10 years with no residual value. No proceeds were received.

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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.