ACCT 1A Lecture Notes - Lecture 8: Book Value, Ddb Worldwide, Institute For Operations Research And The Management Sciences

• School: Irvine Valley College
• Department: Accounting
• Course: ACCT 1A
• Professor: urell

Document Summary

Under straight-line depreciation, an equal portion of an asset"s depreciable cost is allocated to each accounting period over its estimated useful life. (cost-residual value) x (1/useful life) = dep expense or dep cost. Note: (cost-residual value)= depreciable cost and (1/useful life)=straight-line rate. Depreciation expense is a constant amount for each year. Accumulated depreciation increases by an equal amount each year. Carrying amount decreases by the same amount each year until it equals the estimated residual value. This is the reason for the name straight-line method. Depreciation expense, accumulated depreciation and carrying amount decrease systematically from period to period at a constant rate each year. The depreciation expense is said to be a fixed expense because it is constant each year. Units of production depreciation method, allocates the cost of an asset over its useful life based on the relation of its periodic output to its total estimated output. ( (cost residual value) / (estimated total production) ) x actual.