Depreciation of Operating Assets

Depreciation of Operating Assets - or exchanging an asset...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Depreciation of Operating Assets Depreciation  is the process of allocating the cost of long-lived plant assets other than land to  expense over the asset's estimated useful life. For financial reporting purposes, companies may  choose from several different depreciation methods. Before studying some of the methods that  companies use to depreciate assets, make sure you understand the following definitions.  Useful life  is an estimate of the productive life of an asset. Although usually expressed in  years, an asset's useful life may also be based on units of activity, such as items produced,  hours used, or miles driven.  Salvage value  equals the value, if any, that a company expects to receive by selling 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: or exchanging an asset at the end of its useful life. • Depreciable cost equals an asset's total cost minus the asset's expected salvage value. The total amount of depreciation expense assigned to an asset never exceeds the asset's depreciable cost. • Net book value is an asset's total cost minus the accumulated depreciation assigned to the asset. Net book value rarely equals market value, which is the price someone would pay for the asset. In fact, the market value of an asset, such as a building, may increase while the asset is being depreciated. Net book value simply represents the portion of an asset's cost that has not been allocated to expense....
View Full Document

This note was uploaded on 11/14/2011 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online