ACC 100 Final: How is depreciation calculated

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lavendermole636

12 Apr 2016

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Remember: depreciaion is the value of the long-lived asset that is used up over ime. There are a few diferent ways to calculate the cost of using your long-lived assets but you will focus on the most commonly used method: the straight line method. The steps in the process for calculaing depreciaion are: calculate the depreciable amount. This is the amount you will depreciate over the useful life. It is calculated as: cost less residual value: determine the annual depreciaion. This is the value of the asset that you will use up every year. It is calculated as: depreciable amount / esimated useful life. This is the value of the asset that you will use up every month. It is calculated as: annual depreciaion / 12 months: determine the accumulated depreciaion. This is the value of the asset that has been used up since the day the asset was placed in use.

Related Questions

25.Which of the following items does not affect the calculation of depreciation expense?

A.Economic benefits generated by the asset

B.Useful life of the asset

C.Residual value of the asset

D.Capitalized cost of the asset

26.Which of the following statements is correct when the straight-line method is used to compute depreciation?

A.The carrying value of an asset is a constant amount during the asset's useful life

B.Accumulated depreciation is a constant amount during the asset's estimated useful life

C.Depreciation Expense is a constant amount each year

D.The book value of an asset is an increasing amount during the asset's useful life

27.One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

A.reduces book value below residual value.

B.does not consider the useful life of the asset in the calculation of depreciation.

C.cannot be used for tax purposes.

D.uses book value instead of depreciable cost in the calculation of depreciation.

28.Why don't all companies use the same depreciation method?

A.US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes.

B.Different depreciation methods might better reflect the pattern in which assets' economic benefits are used.

C.All companies do use the same depreciation method.

D.Only large companies are allowed to use some of the more complicated depreciation methods.

Using theâ double-declining balanceâ method, calculate theannual depreciation expense that will be recorded each year for anasset that cost$18,400â,

has a useful life of fourâ years, and has an estimated salvagevalue of $3,300. Explain what accounting issueâ arises, if âany, inthe third and fourth years.

Determine the depreciable cost.

	Cost	-.	Salvage value	=	Depreciable cost
	18400	-	3300	=

Complete the depreciation schedule using theâ double-decliningbalance method. â(Complete all inputâ boxes.)

		Book	Annual	Accumulated
Year	Rate	value	depreciation	depreciation
1

Explain what accounting issueâ arises, ifâ any, in the third andfourth years.

Total depreciation charged over the life of the asset In thisâcase, the thirdâ year's depreciation â, and no depreciation ischarged the remaining depreciation is charged the same amount ofdepreciation is charged in the fourth year.

orangepanda414

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $48,870. The equipment was expected to have a useful life of three years, or 4,320 operating hours, and a residual value of $1,350. The equipment was used for 800 hours during Year 1, 1,500 hours in Year 2, 1,300 hours in Year 3, and 720 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-output method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

a. Straight-line method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

b. Units-of-output method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

c. Double-declining-balance method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

Feedback

Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation.

Annual units-of-output depreciation allocates the cost of the asset equally over the units produced (hours).

The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation.

Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method.

Learning Objective 2.

goldtermite491

ACC 100 Final: How is depreciation calculated

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