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**Fixed asset and Depreciation Methods 固定资产和折旧方法**

Supplement I Fixed asset and Depreciation Methods 固定资产和折旧方法 2

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**Classification of Assets**

Current Assets(流动资产) are assets which can be converted into Cash or consumed within one year or the normal Operating cycle of the business Fixed Assets (固定资产)or long-term assets ,refer to those relatively long-lived assets which are held by a business for use in its operation

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**Major Categories of Fixed Assets**

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**Depreciation Method of Plant Asset**

Straight-line method 直线法 Sum- of-the- years’-digits method 年数总和法 Double-declining-balance Method 双倍余额递减法

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**Depreciation Book Value帐面净值 Cost - Accumulated Depreciation**

Represents the portion of an asset’s cost that has already been allocated to expense. Book value of last year =salvage value

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**Sum-of-the-Years’-Digits Method**

Depreciation in the early years of an asset’s estimated useful life is higher than in later years. the years in reverse order The sum of number of years

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**Sum-of-the-Year-Digits Example**

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 2005 using the Sum-of-Years-Digits method.

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**Sum-of-the-Year-Digits Example**

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 2005 using the Sum-of-the-Year-Digits method. 2005 Dep expense=( Cost - Residual Value )*Dep Rate of 2005 =( )*5/15 =7000

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**Sum-of-the-Year-Digits Example**

Compute depreciation for the rest of the boat’s estimated useful life.

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**Sum-of-the-Years-Digits Balance Graph of Depreciation Expense**

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Accelerated Method Example on textbook ,p78

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**Double-Declining Balance Example**

Depreciation in the early years of an asset’s estimated useful life is higher than in later years. The double-declining balance accelerated depreciation rate is 200% of the straight-line depreciation rate of 1/Useful Life.

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**The book value at the beginning of the year**

Double-Declining Balance Example Depreciation in the early years of an asset’s estimated useful life is higher than in later years. The book value at the beginning of the year

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**Double-Declining Balance Example**

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 2005 using the double-declining balance method.

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**Double-Declining Balance Example**

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 2005 using the double-declining balance method.

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**Double-Declining Balance Example**

Compute depreciation for the rest of the boat’s estimated useful life.

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**Double-Declining Balance Example**

Compute depreciation for the rest of the boat’s estimated useful life.

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**Double-Declining Balance Example**

Compute depreciation for the rest of the boat’s estimated useful life.

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**Double-Declining Balance Example**

Total depreciation over the estimated useful life of an asset is the same using either the straight-line method or the declining-balance method.

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**Double-Declining Balance Graph of Depreciation Expense**

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Accelerated Method Example on textbook,p79

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**Double-Declining Balance Example**

Compute depreciation for the equipment.

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**Double-Declining Balance Example**

Compute depreciation for the equipment.

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Exercise Jon Seceda furnace Corp. purchased machinery for $ 50,000 at the beginning of the year 1.It is estimated that it will have a useful life of 5 years , residual value of $5000.compute the depreciation under the each of the following method (round to two decimal places) Sum-of-years’-digits Double-declining balance

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**Sum-of-the-Year-Digits Example**

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**Double-Declining Balance Example**

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Exercise Jon SECEDA furnace corp. purchased machinery for $315,000 on April 1,2004. It is estimated that it will have a useful life of 10 years , scrap value of $ 15000 From the information given , compute the depreciation charge in 2004 under each of the following method( round to three decimal places) straight-line sum-of-years’-digits Double-decline balance

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Exercise [( ) ×1/10] ×9/12=22500 [( )×10/55]×9/12= [(315000×2/10] ×9/12=47250

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**Depreciation Book Value帐面净值 Market Value/ fair Value 市场价值 /公允价值**

the price which the assets are exchanged in the market Book Value =Market Value

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assignment Problems 2 ( p 81) Problems 1 ( p 80)

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