depreciation method

over time, _____ lose their ability to provide services (lose usefulness)

fixed assets

depreciation

the periodic transfer of the cost of fixed assets to expense

JE for depreciation

DR depreciation expense

CR accumulated depreciation

book value formula

cost - accumulated depreciation

to compute depreciation you must know:

initial purchase cost

expected life

estimated value at the end of useful life

depreciable cost formula

initial cost - residual value

methods for calculating depreciation

straight-line method

units of activities

double-declining balance

the straight line method provides the ____ depreciation expense each year

same

straight line method depreciation formula

(cost-estimated residual value)/estimated life

units of activity depreciation method measures what

cost based on usage

units of activity formula (2 step)

1. compute depreciation per unit

= (cost-estimated residual value) / estimated hours,units, etc

2. compute depreciation expense

= depreciation per unit x units of activity for period

double-declining balance method

provides declining depreciation expense over the asset’s life

double declining balance method formula (3 steps)

step 1: determine straight-line rate

= 100%/ expected useful lif e

step 2: double it to get DDB rate

straight line rate x 2

step 3: multiply DDB x book value at beg of year