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Unformatted text preview: units of activity method cost- salvage value= depreciable cost depreciable cost/useful life= depreciation expense In balance, Book value=salvage value Accumulated depreciation= depreciable costs Depreciation is always calculated in a calendar year (January-December) CLICKER: Equipment with useful life of 5 years was purchased for $20,000 on January 1 st . a salvage of $2,000 was estimated. What is the depreciation expense for the first year using the straight line method? 20,000-2,000/5= $3,600 Example: Jan. 1 st- $90,000 cost Useful life- 8 years Salvage value- $8,000 Depreciable cost- 90,000-8,000= 8200 Depreciable exp (5/12) 82,000/8= 10,250 10,250/12 (mths) X 3 (oct, nov, dec)= 2,562.50 CLICKER: Equipment with useful life of 5 years was purchased for 20,000 on July 1 st . a salvage of 2,000 was estimated. What is the depreciation expense for the first year? 18,000/5= 3600 3600/12 X 6 = 1800...
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- Fall '08