Learning Objectives LO 4 Calculate depreciation expense LO

Learning Objectives LO 4 Calculate depreciation expense. LO 5 Calculate depreciation for a partial year. LO 6 Calculate accumulated depreciation and book value. © 2014 Cengage Learning. All Rights Reserved.

Lesson 19 -2 Calculating Straight-Line Depreciation LO 4 Original Cost − Estimated Salvage Value = Estimated Total Depreciation Expense $8, 500. 00 − $500. 00 = $8, 000. 00 Estimated Total Depreciation Expense ÷ Years of Estimated Useful Life = Annual Depreciation Expense $8, 000. 00 ÷ 4 = $2, 000. 00 © 2014 Cengage Learning. All Rights Reserved. SLIDE 2

Calculating Depreciation Expense for Part of a Year Lesson 19 -2 LO 5 Annual Depreciation Expense ÷ Months in Year = Monthly Depreciation Expense $900. 00 ÷ 12 = $75. 00 Monthly Depreciation Expense × Number of Months Asset Is Used = Prior Year’s Depreciation Expense $75. 00 × 4 = $300. 00 © 2014 Cengage Learning. All Rights Reserved. SLIDE 3

Lesson 19 -2 Calculating Accumulated Depreciation LO 6 20 X 2 Accumulated Depreciation + 20 X 3 Depreciation Expense = 20 X 3 Accumulated Depreciation $1, 200. 00 + $900. 00 = $2, 100. 00 © 2014 Cengage Learning. All Rights Reserved. SLIDE 4

Lesson 19 -2 Calculating Book Value Original Cost − Accumulated Depreciation $3, 000. 00 − $2, 700. 00 LO 6 = Ending Book Value = © 2014 Cengage Learning. All Rights Reserved. $300. 00 SLIDE 5

Lesson 19 -2 Audit Your Understanding 1. Which accounting concept is being applied when depreciation expense is recorded for plant assets? ANSWER Matching Expenses with Revenue © 2014 Cengage Learning. All Rights Reserved. SLIDE 6

Lesson 19 -2 Audit Your Understanding 2. What three amounts are used to calculate a plant asset’s annual depreciation expense using the straight-line method of depreciation? ANSWER Original cost, estimated salvage value, and estimated useful life © 2014 Cengage Learning. All Rights Reserved. SLIDE 7