West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2020, it purchased, with cash, a cruising boat for $918,000, having a useful life of 10 years or 11,350 hours, with a residual value of $237,000. The company’s year-end is December 31. Required: Calculate depreciation expense for the fiscal years 2020, 2021, and 2022 by completing a schedule. (Note: Depreciation is calculated to the nearest month. Assume actual hours of service were: 2020, 870; 2021, 1,930; 2022, 1,685.)
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.
West Coast Tours runs boat tours along the west coast of British Columbia. On March 5, 2020, it purchased, with cash, a cruising boat for $918,000, having a useful life of 10 years or 11,350 hours, with a residual value of $237,000. The company’s year-end is December 31.
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