Accounting Notes- Day 17

# Accounting Notes- Day 17 - • units of activity method...

This preview shows pages 1–3. Sign up to view the full content.

ACCOUNTING 2000 10/21 Building Includes all costs related directly to purchase or construction Equipment Include all costs incurred in acquiring the equipment and preparing it for use CLICKER: Tiger CO. purchased equipment and costs Cash price \$34,000 Sales Tax \$1,200 Insurance during transit \$200 Installation and testing \$400 What is the cost of the equipment? \$35,800 To Buy or to Lease? A lease is a contractual agreement If we buy it, we are going to depreciate it CLICKER: Depreciation is the process of what? Cost Allocation Net Book Value= Asset (equipment)- Accumulated Depreciation Accumulated Depreciation-Equipment contra asset account appears just after the account it offsets on the balance sheet Clicker: An asset has a cost of \$50,000 and accumulated depreciation of \$35,000. What is the net book value?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Factors in computing depreciation cost useful life salvage value Depreciation methods straight-line (what we are going to use) declining balance sheet
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

{[ snackBarMessage ]}

### Page1 / 3

Accounting Notes- Day 17 - • units of activity method...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online