Special Depreciation Methods

Special Depreciation Methods - Special Depreciation Methods...

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Special Depreciation Methods – Group/Composite 1. Rationale: When company has thousands of assets, depreciation could get very cumbersome. 2. Defined: a. Group: a collection of assets that share similar useful lives and attributes b. Composite: a collection of assets based on convenience. Example: all depreciable assets in one manufacturing facility. 3. Steps: a. Find the group/composite rate of depreciation i. Find the depreciation per year for each asset ii. Sum the annual depreciation amounts iii. Divide sum by the total costs (historical cost) b. Find the average service life (average useful life)…aka group/composite life i. Find the total depreciable base for all assets ii. Divide total depreciable base by the annual depreciation amount c. Calculate Depreciation Expense i. Multiply the total cost by the group/composite rate 4. How to account for PP&E subtraction (disposition) from the group/composite a. Assume book value of the disposed item exactly equals the cash received, thus no
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This note was uploaded on 11/15/2011 for the course ACC 321 taught by Professor Staff during the Fall '08 term at Miami University.

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Special Depreciation Methods - Special Depreciation Methods...

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