1. Accounting for Plant Assets and Depreciation
Chapter 18, Section 2
Calculating Depreciation Expense

2. Depreciating Plant Assets
Plant assets wear out or become technologically obsolete.
CONCEPT: Matching Expenses with Revenue
Depreciation Expense

3. Calculating Depreciation Expense
3 factors affect depreciation expense:
Original Cost
Estimated Salvage Value
Estimated Useful Life
Physical depreciation
Functional depreciation

4. Straight-Line Depreciation
Equal amount of depreciation expense each year.
Est. Total = Original – Est. Salvage
Depreciation Cost Value
Annual Depr. = Est. Total ÷ Years of
Expense Depreciation Useful Life

5. Straight-line Depreciation
Lesson 21-2 (GJ)
Straight-line Depreciation
Calculating Annual Depreciation Expense
1. Subtract the asset’s estimated salvage value from the original cost.
2. Divide the estimated total depreciation expense by the years of estimated useful life.
Estimated Salvage Value
Original Cost
Estimated Total Depreciation Expense = –
$3,250.00 –
$250.00 =
$3,000.00 1
Annual Depreciation Expense =
Years of Estimated Useful Life ÷
Estimated Total Depreciation Expense
$3,000.00 ÷ 5 =
$600.00 2

6. Calculating Depreciation Expense for Part of a Year
Calculating Partial Year’s Depreciation Expense
1. Divide the annual depreciation expense by 12.
2. Multiply the monthly depreciation expense by the number of months the plant asset is used in a year.
Months in a Year
Annual Depreciation Expense
Monthly Depreciation Expense = ÷
$600.00 ÷ 12 =
$50.00 1
Partial Year’s Depreciation Expense =
Number of Months Asset Is Used ×
Monthly Depreciation Expense
$50.00 × 5 =
$250.00 2

7. Calculating Accumulated Depreciation
2013 Depreciation Expense
2012 Accumulated Depreciation
2013 Accumulated Depreciation = +
$1,200.00 +
$600.00 =
$1,800.00
Calculating Book Value
Accumulated Depreciation
Original Cost
Ending Book Value = –
$3,250.00 –
$1,800.00 =
$1,450.00
Annual Depreciation
Beginning Book Value
Ending Book Value = –
$2,050.00 –
$600.00 =
$1,450.00

8. PROBLEMS Complete the following on www.aplia.com
Work Together 18-2 (text pg.541)
On Your Own 18-2 (text pg. 541)
Application Problem 18-2 (text pg. 556)