Acc011_06_DepreciationDepletionAmortization

Acc011_06_DepreciationDepletionAmortization - Depreciation,...

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Depreciation, Depletion, & Amortization
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Depreciation, Depletion, & Amortization • Depreciation-tangible plant assets • Depletion-natural resources • Amortization-intangible assets • are methods of allocating the cost of an asset with limited life to the periods in which the benefits of the asset are received. There need be no connection between depreciation,
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Depreciation, Depletion, & Amortization • Depreciable Base • Estimation of Service Lives • Estimation of Residual Value • Methods of Calculating Depreciation – Activity Method (method normally used for depletion) – Straight Line (method normally used for amortization) – Sum of Years Digits – Declining Balance
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Depreciable Base • Cost less Residual Value. • It should be noted that different companies can use different values for identical assets. • For example: Leasco, Greyhound and Boothe Computer all depreciated the same computer on a straight-line basis, Leasco and Greyhound assumed a 10% salvage value, while Boothe assumed zero salvage value.
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Estimation of Service Lives and economic (obsolescence) factors • All estimates,
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This note was uploaded on 05/19/2008 for the course ACCT 3511 taught by Professor Balsam during the Spring '07 term at Temple.

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Acc011_06_DepreciationDepletionAmortization - Depreciation,...

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