Principles of Financial Accounting · free preview
Depreciation Methods and the Allocation of Capitalized Costs
Straight-line, units-of-production, and declining-balance methods spread a depreciable asset's cost over its useful life in different patterns, while the book value and accumulated depreciation keep the original cost visible on the balance sheet.
1. The depreciable base
The depreciable base
2. Straight-line
Straight-line
3. Units of production
Units of production
4. Declining balance and sum of the years
Declining balance and sum of the years
5. Depreciable base computation
Equipment costs 60,000 dollars with an estimated 12,000 dollar salvage value after four years. What is the depreciable base?
6. Straight-line computation
Using a 48,000 dollar depreciable base over four years, compute annual straight-line depreciation.
7. Units of production rate
A machine with a 48,000 dollar depreciable base is expected to produce 240,000 units. Compute the depreciation rate per unit in dollars.
8. Double-declining first year
A 60,000 dollar machine has a four-year life. Compute first-year depreciation under double-declining-balance, ignoring salvage for the computation.
9. Book value after year one
A 60,000 dollar machine takes 12,000 dollars of first-year depreciation. Compute year-end book value in dollars, number only.
10. Units depreciation for the year
The rate is 0.20 dollars per unit and the machine produces 80,000 units this year. Compute depreciation in dollars, number only.
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