1. Depreciation Calcuations October 21, 2019
Unit 19
Depreciation Calcuations
October 21, 2019

2. LONG TERM ASSETS TANGIBLE INTANGIBLE Buildings IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
Franchises, Goodwill, etc.
Land

3. LONG TERM ASSETS TANGIBLE INTANGIBLE Buildings IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
Franchises, Goodwill, etc.
Land

4. BASKET PURCHASE
FACTORY

5. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
TANGIBLE
INTANGIBLE
DEPRECIATION
AMORTIZATION
Buildings
IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
DEPLETION
Franchises, Goodwill, etc.
IMPAIRMENT
Land

6. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
EXPENSE
EXPENSE
ACCUMULATED DEPRECIATION
ACCUMULATED AMORTIZATION
DEPLETION
IMPAIRMENT
EXPENSE
LOSS
ACCUMULATED DEPLETION
ASSET

7. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

8. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
ACCELERATED METHODS
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

9. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

10. To Calculate Depreciation Expense
You need the original Acquisition Cost
You need the salvage value estimate (expected value of the asset at the end of its useful life)
You need the useful life of the asset (in accounting periods or in units of production)

11. Straight-Line Depreciation
Calculate the Depreciable Amount:
Original Acquisition Cost – Salvage Value = Depreciable Amount
Divide the Depreciable Amount by the number of periods of useful life
This gives each period’s Depreciation Expense.
Stop depreciating when NBV reaches salvage value.

12. Straight-Line Depreciation
Acquisition Cost
$17,000
Depreciable Amount
Estimated Useful Life: FOUR YEARS
$12,000
“Every penny it takes to get the machine purchased, delivered, put in place, installed, connected, set up, configured, programmed, and READY TO USE”
$17, $5,000
Estimated Salvage Value
$5,000

13. Straight-Line Depreciation
Acquisition Cost
$17,000
$3000
Depreciable Amount
$3000
Estimated Useful Life: FOUR YEARS
$12,000
$12,000 / 4 = $3,000
$3000
$3000
Estimated Salvage Value
$5,000

14. NET BOOK VALUE $17,000 $14,000 $11,000 $ 8,000 $ 5,000 YEAR 1 YEAR 2

15. Double-Declining Balance
Divide “1” by the useful life in periods. This gives a percentage
DOUBLE that percentage.
Multiply that DOUBLED PERCENTAGE by the NET BOOK VALUE at the beginning of EACH PERIOD.
That gives you each period’s Depreciation Expense.
Notice that each period’s expense will be different because of the declining NET BOOK VALUE!
STOP DEPRECIATING when NBV reaches the Salvage Value.

16. Double Declining Balance Depreciation
Acquisition Cost
$17,000
Estimated Useful Life: FOUR YEARS
“Every penny it takes to get the machine purchased, delivered, put in place, installed, connected, set up, configured, programmed, and READY TO USE”
Estimated Salvage Value
$5,000

17. Double Declining Balance Depreciation
Acquisition Cost
$17,000
Estimated Useful Life: FOUR YEARS
1 / 4 = 25%
50%
of NET BOOK VALUE
Estimated Salvage Value
$5,000

18. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
50%
of NET BOOK VALUE
$8,500
Estimated Salvage Value
$5,000

19. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
$8,500
50%
of NET BOOK VALUE
$4,250
Estimated Salvage Value
$5,000

20. depreciate past the Salvage Value!
You NEVER
depreciate past the Salvage Value!

21. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
$8,500
50%
$-3,500
of NET BOOK VALUE
$4,250
Estimated Salvage Value
$5,000

22. $17,000
NET BOOK VALUE
$ 8,500
$ 5,000
YEAR 1
YEAR 2
YEAR 3
YEAR 4

23. Fleet of 40 carts for use in factory
Each cart cost $10,000
Estimated useful life of 10 years
Fleet Salvage value of $25,000

24. Units of Production Depreciation
Calculate the Depreciable Amount:
Original Acquisition Cost – Salvage Value = Depreciable Amount
Divide the Depreciable Amount by the estimated units of production the asset can produce during its useful life.
Multiply that “cost per unit of production” by each period’s production quantity.
That gives you each period’s Depreciation Expense.
Stop depreciating when NBV reaches the salvage value.

25. Units of Production Depreciation
Acquisition Cost
$300,000
$-33,500
Year 1:
67,000 pieces stamped
Depreciable Amount
$250,000
$250,000
$33,500
Estimated Useful Life: 500,000 pieces
$0.50 per piece stamped
Estimated Salvage Value
$50,000

27. depreciate past the Salvage Value!
You NEVER
depreciate past the Salvage Value!

28. Units of Production Depreciation
Acquisition Cost
$300,000
$-33,500
Depreciable Amount
$250,000
$250,000
$33,500
Estimated Salvage Value
$50,000

30. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

31. LONG TERM ASSETS
DEPRECIATION
AMORTIZATION
DEPLETION
IMPAIRMENT

32. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
EXPENSE
EXPENSE
ACCUMULATED DEPRECIATION
ACCUMULATED AMORTIZATION
DEPLETION
IMPAIRMENT
EXPENSE
LOSS
ACCUMULATED DEPLETION
ASSET

33. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

35. BE PREPARED

36. What be a’coming… Wednesday: Receivables, Bad Debt, Credit Card sales
Friday: Current Liabilities, Sales Tax accounting, liquidity, solvency
Monday: Payroll Accounting Xtra-Lite