Required information [The following information applies to the questions displayed below.] Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances: Manufacturing equipment Accumulated depreciation through 2019 During 2020, the following expenditures were incurred for the equipment: Major overhaul of the equipment on January 2, 2020, that improved efficiency Routine maintenance and repairs on the equipment The equipment is being depreciated on a straight-line basis over an estimated life of 20 years with a $18,000 estimated residual value. The annual accounting period ends on December 31. View transaction list < Required: 3. Prepare the journal entries to record the two expenditures during 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet 1 2 $ 154,000 54,400 Record the expenditure for the major overhaul of the equipment. Note: Enter debits before credits. Transaction 1 General Journal Debit $ 13,000 1,100 Credit >

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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.

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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.