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ACCT 305 Live Lecture Excel Week 3

ACCT 305 Live Lecture Excel Week 3 - DEPRECIATION EXPENSE...

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DEPRECIATION EXPENSE: SOLVING FOR UNKNOWNS TIP Set up as algebric equation and solve for unknown EXAMPLEInformation given: Cost  80,000  Residual  ?  Service Life  4  Method  SYD  Depreciation Year 2  15,000  SYD formula:   =N(N+1)/2  =4(4+1)/2  = 10 SYD fraction for Year 2:  3/10 Formula: Depreciation expense Year 2 = (Cost - Residual) x fraction  \$15,000 = (\$80,000 - Salvage) x 3/10 \$150,000 = (\$80,000 x 3) - (Salvage x 3) \$150,000 = \$240,000 - 3 Salvage \$150,000 + 3Salvage = \$240,000 3 Salvage = \$90,000 Salvage = \$30,000 Check: (\$80,000 - \$30,000) x 3/10 = \$15,000

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CHANGE IN DEPRECIATION ESTIMATE FACTS: Purchased asset on 1/1/07 for \$9,000,000 Residual value \$1,000,000 25-year useful life Straight-line depreciation In 2009 changed the following estimates: Useful life to 20 years Residual value to \$500,000 REQUIRED What is depreciation expense for 2009? SOLUTION: Calculation of annual depreciation af ter the estimate change:       \$ 9 ,0 0 0 ,0 0 0     Cos t    \$ 3 2 0 ,0 0 0
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