The Lickert Company is a coal company based in West Virginia. The company recently purchased a new coal truck for $60,000. The truck had an expected useful life of 200,000 miles and an expected salvage value of $2,000. Calculate the depreciation expense using the Units-of-production method assuming the truck travelled 40,000 miles on company business during the year.
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.
SE9-4
The Lickert Company is a coal company based in West Virginia. The company recently purchased a new coal truck for $60,000. The truck had an expected useful life of 200,000 miles and an expected salvage value of $2,000. Calculate the depreciation expense using the Units-of-production method assuming the truck travelled 40,000 miles on company business during the year.
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