ADMN 3221H Chapter Notes - Chapter 11: Book Value, Income Statement, Impaired Asset

• School: Trent University
• Department: Business Administration
• Course: ADMN 3221H
• Professor: Ebadul Islam

Document Summary

Depreciation: depreciation (and amortization more broadly) is a means of cost allocation, depreciation involves: It is not a method of valuation: allocating the depreciable amount of property, plant, and equipment over the periods expected to benefit from the use of the assets, this allocation is generally recognized as depreciation expense. Depreciable amount: depreciable amount is initially calculated as, original cost of the asset, less estimated residual value (or salvage value) Straight-line method: most widely used, (cost residual value)/estimated useful life, based on two assumptions, asset delivers equal economic benefits each year, maintenance expense is about same each period, distorts rate of return analysis. Units of production method: calculates depreciation according to usage or productivity instead of the passage of time, (cost residual value)/total estimated units, difficult to estimate total number of units over life of asset. Impairment occurs when the carrying amount of the long-lived asset (such as.