Methods of Depreciation Power Point Presentation.ppt

It is the Power point presentation on Methods of Depreciation. The ppt covers the fixed assets, various types of fixed assets. It also covers the methods of depreciation and how to use it.

1. Methods of Depreciation
TEACHER VERSION

2. Things of Value
That You Own That Businesses Own

3. What is Depreciation?
An expense based on the expectation
that an asset will gradually decline in
usefulness due to time, wear & tear, or
obsolescence.

4. Trade in Value/Salvage Value
The value after it has completed its
useful life is referred to as the trade in
value, salvage value or residual value.

5. Straight-Line Method
Yearly depreciation = cost of asset –trade in value
years of life
Cost = $36,000
Years of life = 5 years
Trade in value = $6,000
Calculate the yearly depreciation using the above
equation……..

6. Answer
$36,000 -$6,000 = $30,000 =
5 years 5 years
$6,000
How about monthly?????

7. Straight Line Method:
Truck with a trade in value of $6000
Y
r
Depreciation for the Year Accumulated Depr Book Value
118000 / 5 years = 3600 3600 24000 –3600 = 20400
218000 / 5 years = 3600 3600 + 3600 = 7200 24000 –7200 = 16800
318000 / 5 years = 3600 7200+ 3600 = 10800 24000 –10800 = 13200
418000 / 5 years = 3600 10800 +3600 = 14400 24000 –14400 = 9600
518000 / 5 years = 3600 14400 + 3600 = 18000 24000 –18000 = 6000
total $18000

8. Practice Problems SL Method
1.$49,720, salvage $$6,880, life 7 years:
2.$75,000, salvage $18,900, life 7 years:
3.$45,325, salvage $1,235, life 4 years:

9. Double Declining Balance Method
Accelerated Depreciation Method-It depreciates
MOST in the beginning.
Trade in value/Salvage Value is not considered
Calculated using asset’s book value (original –A/D)
Follow these steps to determine the DDB rate
1. compute the annual straight line depreciation rate
Year/useful life –1÷5 = 20%
2. multiply the rate by 2. this is the DDB rate
20% x 2 = 40%

10. Double Declining Balance Method
$16,000 , life of 5 years, salvage $1500
yrDepreciation for
Year
Accumulated
Depreciation
BV = Cost –Accum
Depreciation
116000x 40% = 64006400 16000-6400=9600
29600 x 40% = 3840 6400 + 3840= 10240 16000-10240=5760
35760 x 40%= 2304 10240 + 2304 = 12544 16000-12544=3456
43456 x 40% = 1382.412544+ 1382.4 = 13926.416000-13926.4=2073.6
52073.6x 40% =
829.44
Cannot exceed salvage,
So2073.6-1500=
573.6 is the amt of
depreciation used
13926.4 + 573.6 = 1450016000-14500= 1500
Salvage value
1/5 = .2 x 2 = .4 x 100 = 40%

11. Complete the Following
Straight-line method
**Problem A1-text appendix page A-4
Double Declining method:
**Problem A2-text appendix page A-4
MACRS-
** Problem A3-Text appendix page A-4

12. A-1 Straight Line Depreciation
Yea
r
Depreciation for the Year Accumulated
Depreciation
Book Value (cost –
A.D.)
1
2
3
4
5
Straight-line method
**Problem A1-text appendix page A-4

13. Double Declining Balance Method
Yea
r
Depreciation for the Year Accumulated
Depreciation
Book Value (cost –
A.D.)
1
2
3
4
5
Double Declining method:
**Problem A2-text appendix page A-4

14. Modified Tax Recovery System MACRS
Property is divided into nine classes to determine the
useful years.
Under MACRS the trade in value is ignored. This
method is a combination of straight line and double
declining method.
Turn to page A-3 in the Appendix to view the property
description.

15. MACRS Depreciation
Which Property class is the following?
Warehouse?
Trucks?
Furniture?
Fences?
How much would each depreciate YEARLY?