The CPP Co. acquired a semi-truck on January 1, YR1 at a cost of $216,000. The truck had a six-year useful life and an estimated salvage value of $24,000. The straight-line method of depreciation was used. On January 1. YR4, CPP revised its estimate of the trucks useful life and determined that it would be in use for a total of 11 years from the date of acquisition. Furthermore, the estimated salvage value of the truck was lowered to $20,000. The firm's fiscal year-end is December 31. 1. What is the annual depreciation expense until Dec. 31, YR3? Answer: 2. What is the Book Value of the truck on Dec. 31, YR3? Answer: 3. What is CPP YR4 depreciation expense? Answer: 4. If on May 1, YR4, in addition to revising the estimates of useful life and salvage value, CPP spent $12,000 for routine maintenance on the truck, what would be CPP's YR4 depreciation? Answer:

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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.