# Chapter 10 Key Concepts and Terms.docx - Chapter 10 Key...

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Chapter 10 Key Concepts and TermsAccounting for Depreciation:Basic terms1) Depreciable Cost = Cost – residual or salvage value2) Useful Life3) Book Value = Cost - accumulated Depreciationstraight-line method: Annual depreciation = (Cost –residual value)Useful lifeunits-of-activity:Per Unit depreciation =Cost – residual valueTotal units of lifeAnnual depreciation = depreciation per unit * units for yearDouble declining balance method: Book value * 2 * straight-line rateStraight line rate = 1 / useful lifeRevising an estimate:1) Calculate Book Value (BV) at date of revision2) (BV – new residual value) / remaining life = revised annual depreciationSelling an asset:1) Record depreciation to date of sale2) Calculate Book Value on sale date3) Compare BV to Sales price4) If sales price > BV, gain on sale
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