ACCTG 101 Lecture Notes - Lecture 30: Book Value

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harlequinmink794

18 Dec 2020

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Uniform/straight line: constant depreciation expense each year, used for assets where the same level of benefits occur in each year of its life. Base depreciation off of cost minus residual value and then divide this number by the amount of useful years. Depreciation expense declines each year, for assets where most of the use is in early years. Rate = 2 * (1 / useful years) 2 changed to three if triple declining. If it last 5 years: rate = 2 * (1/5) = 40% ***asset"s residual value is not deducted in calculating depreciation*** i. e. first year would be the full 500,000 * 40% = 200,000. Second year would be (500,000 - 200,000) * 40% = 120,000. The last year is rounded, the book value cannot be less than residual value. Based on a metric such a miles in a truck. Find depreciable amount (cost less residual value)

Related Questions

The CEO of Herald Corporation has asked you to help him describethe effects of different depreciation methods. Herald
recently purchased a new machine with a capitalized cost of$500,000. The machine has an expected life of 5 years with
no expected salvage value. Select the best response from thosebelow regarding the depreciation for this asset.
A)
if we choose double declining balance depreciation rather thanstraight-line, depreciation expense in the first two
years of this asset's life will be lower
B)
if we choose double declining balance depreciation rather thanstraight-line, net income for the first two years of
this asset's life will be lower
C)
if we choose double declining balance depreciation rather thanstraight-line depreciation, total assets will be
greater at the end of each of the first two years of this asset'slife
D)
two of the above statements are correct
E)
all of the above statements are correct
F)
none of the above statements are correct

maroonbear267

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $9,792,100. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $78,100.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.

c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipmentâs use?

year

amaranthsalmon167

Depreciation by Two Methods; Sale of Fixed Asset

New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.

In the first week of the fifth year, the equipment was sold for$135,000.

Required:

1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:

a. Straight-line method

Year	DepreciationExpense	Accumulated Depreciation,End of Year	Book Value, End ofYear
1	$	$	$
2	$	$	$
3	$	$	$
4	$	$	$
5	$	$	$

b. Double-declining-balance method

Year	DepreciationExpense	Accumulated Depreciation,End of Year	Book Value, End ofYear
1	$	$	$
2	$	$	$
3	$	$	$
4	$	$	$
5	$	$	$

yellowworm651

ACCTG 101 Lecture Notes - Lecture 30: Book Value

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