Apex Trucking purchased a truck for $ 100,000 on January 1, 2020. The useful life of the
Question:
Apex Trucking purchased a truck for $ 100,000 on January 1, 2020. The useful life of the truck was estimated to be either five years or 200,000 miles. Salvage value was estimated at $20,000. Over the actual life of the truck, it logged the following miles:
At the end of the sixth year, the truck was sold for $12,000.
Prepare the journal entries to record depreciation over the life of the truck and its sale, assuming these methods:
1. Activity method
2. Straight-line method
Year 1 48,000 miles Year 2 35,000 miles 40,000 miles 25,000 miles Year 3 Year 4 Year 5 35,000 miles 10,000 miles Year 6
Step by Step Answer:
1 Activity method Depreciation Expense per Mile 100000 20000 200000 Miles 04Mile Depreciation Expens...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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