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Straight Line Depreciation

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Ashlei Castillo

on 31 October 2012

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Transcript of Straight Line Depreciation

By: Ashlei Castillo
Nathan Mclean
LaKesha Mays Straight Line Depreciation Plant Assets Straight-Line Depreciation Quick Study 8-3 Partial- Year Depreciation Exercise 8-4 Exercise 8-9 Quick Study 8-3
On January 2, 2 2011 the Crossover Band aquires sound equipment for concert performances at a cost of $55,900. The band estimates it will use this equipment for four years, during which time it anticipates performing about 120 concerts. It estimates that after four years it can sell equipment for $1,900. During year 2011, the band performs 40 concerts. Compute the year 2011 depreciation using the straight-line method. In early January 2011, Lab Tech purchases computer equipment for $147,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $30,000. Prepare a table showing depreciation and book value for each of the four years assuming straight line depreciation. On April 1,2010, Stone's Blackhoe Co. purchases a trencher for $250,000. The machine is expected to last five years and have salvage value of $25,000. Compute depreciation expense for both 2010 and 2011 assuming the company uses the straight-line method. 8-2 C 1 Acquisition
1. Compute cost. Plant Assets Disposal
4. Record disposal. Use
2. Allocate cost to periods
3. Account for subsequent
expenditures. Decline in asset value over its useful life 8-3 The cost of buildings include many costs; the purchase price plus the following: Land is not a depreciable asset, but land improvements are. C1 Land and Buildings Attorney fees Title fees Taxes Brokerage
fees Cost of purchase or construction 8-4 C1 Machinery and Equipment Transportation
charges Taxes Insurance while
in transit Installing,
assembling, and
testing Purchase
price 8-4 C1 Machinery and Equipment Transportation
charges Taxes Insurance while
in transit Installing,
assembling, and
testing Purchase
price Cost Determination Examples of reasonable expenditures:
Purchase price, taxes, building repairs, transportation charges, etc. Cost is determined by all of the reasonable expenditures necessary to get the asset in place and in a usable condition. Cost Determination 8-6 P1 = $50,000 - $5,000
5 years = Depreciation
Expense per Year $9,000 = Depreciation
Expense for Period Cost - Salvage Value
Useful life Straight-Line Depreciation Often plant assets are purchased at a date other than the beginning or end of the accounting period and depreciation must be recorded for only part of a year. Calculate the straight-line depreciation on December 31, 2011, for equpiment purchased on June 30, 2011. The equipment cost $75,000, has a useful life of 10 years, and an estimated salvage value of $5,000. Depreciation = ($75,00-$5,000) / 10
=$7,000 for all 2011 Depreciation = $7,000 x (6/12) = $3,500 for 6 months 8-1 C 1 Tangible in Nature Actively Used in Operations Expected to Benefit Future Periods Called Property, Plant, & Equipment
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