Depreciation Chapter 13 Depreciation Allocating the total cost

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Depreciation Chapter 13

Depreciation Chapter 13

Depreciation Allocating the total cost of an asset over the years of a business

Depreciation Allocating the total cost of an asset over the years of a business that will benefit from its use. Scrap Value - value of the asset after number of years after expected use

2 main methods of Depreciation Straight-Line Method Reducing Balance Method

2 main methods of Depreciation Straight-Line Method Reducing Balance Method

Straight-Line Method Original Cost less Estimated Scrap Value Number of years of expected use

Straight-Line Method Original Cost less Estimated Scrap Value Number of years of expected use = Annual Depreciation Charge

Depreciation on the Financial Documents Net Book Value (NBV) - the current value of

Depreciation on the Financial Documents Net Book Value (NBV) - the current value of an asset (original cost less accumulated depreciation) Also called Net Book Amount (NBA) or Written. Down Value (WDV) Shown as an expense on Profit and Loss account Shown as a reduction of asset on Balance Sheet.

Example Bob buys a van for £ 10, 000. He expects to use it

Example Bob buys a van for £ 10, 000. He expects to use it for 4 years and then sell it for £ 2, 000. What is the annual depreciation? What is the NBV after 3 years? What is the depreciation annual percentage of original cost?

Reducing-Value Method 1 st years - Original Cost less Set Percentage After 1 st

Reducing-Value Method 1 st years - Original Cost less Set Percentage After 1 st year - NBV less Same Percentage Set Percentage is usually double the rate of Straight-Line Method cost percentage.

Example Bob buys the same van but uses the Reducing Value Method. What is

Example Bob buys the same van but uses the Reducing Value Method. What is rate of depreciation? What is the NBV at the end of 4 years? Two methods to fix this: Simplify the last year Use formula on bottom of page 175.

Choosing a Method Why Straight-Line? Simpler and uses Matching Convention better. Why Reducing Balance?

Choosing a Method Why Straight-Line? Simpler and uses Matching Convention better. Why Reducing Balance? Accurately shows the value over the years (vehicles especially) and offsets high maintenance costs at the end of the life of an asset.

Homework Questions 13. 1 and 13. 2 Preview Chapter 14

Homework Questions 13. 1 and 13. 2 Preview Chapter 14

Depreciation and Income Taxes Asset Depreciation Book DepreciationDepreciation and Income Taxes Asset Depreciation Book Depreciation
Closing Depreciation Concept Closing Depreciation Closing Depreciation StepClosing Depreciation Concept Closing Depreciation Closing Depreciation Step
DEPRECIATION 1 DEPRECIATION CONCEPT AND DEFINITION OF DEPRECIATIONDEPRECIATION 1 DEPRECIATION CONCEPT AND DEFINITION OF DEPRECIATION
Maintenance Cost Maintenance Cost Total Cost Maintenance costMaintenance Cost Maintenance Cost Total Cost Maintenance cost
ALLOCATING EXPENSES Allocating to your own Organization andALLOCATING EXPENSES Allocating to your own Organization and
Allocating Scarce Resources Chpt 1 Allocating Scarce ResourcesAllocating Scarce Resources Chpt 1 Allocating Scarce Resources
Allocating Spending Afternoon Session Part I Topics AllocatingAllocating Spending Afternoon Session Part I Topics Allocating
ROI 378 ROI Total Benefits Total Cost TotalROI 378 ROI Total Benefits Total Cost Total
ShortRun Cost Functions Total Cost TC fQ TotalShortRun Cost Functions Total Cost TC fQ Total