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Straight line method assume the delivery truck was

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Unformatted text preview: 2, 400 2 , 400 4 , 200 20% = 2, 400 2 , 400 6 , 600 x 20% = 2, 400 2 , 400 9 , 000 12, 000 x 20% = 2, 400 2 , 400 1 1, 400 12, 000 x 20% = 2, 400 600 1 2, 000 x 9/ 12 3/ 12 = $ Accum. Deprec. = $ 1 2, 000 J our nal ent r y: 2012 Depr eciat ion expense Accumult at ed depr eciat ion Chapter 9-23 1, 800 1, 800 SO 3 Accounting for Plant Assets Accounting for Plant Assets Declining-Balance Decreasing annual depreciation expense over the asset’s useful life. Double declining-balance rate is double the straight-line rate. Chapter 9-24 Accelerated method. Rate applied to book value. SO 3 Compute periodic depreciation using the straight-line method, SO and contrast its expense pattern with those of other methods. and Accounting for Plant Assets Accounting for Plant Assets Illustration: (Declining-Balance Method) Illustration 9A-2 Declining Balance x Rate = Annual Expense Accum. Deprec. Book Value $ 5,200 $ 5,200 $ 7,800 Year Beginning Book value 2012 13,000 40% 2013 7,800 40 3,120 8,320 4,680 2014 4,680 40 1,872 10,192 2,808 2015 2,808 40 1,123 11,315 1,685 2016 1,685 40 12,000 1,000 2012 Journal Entry Chapter 9-25 685* Depreciation expense 5,200 Accumulated depreciation * Computation of $674 ($1,685 x 40%) is adjusted to $685. 5,200 SO 3 Accounting for Plant Assets Accounting for Plant Assets Units-of-Activity Expense varies based on units of activity. Chapter 9-26 Companies estimate total units of activity to calculate depreciation cost per unit. Illustration 9A-3 Depreciable cost is cost less salvage value. SO 3 Compute periodic depreciation using the straight-line method, SO and contrast its expense pattern with those of other methods. and Accounting for Plant Assets Accounting for Plant Assets Illustration: (Units-of-Activity Method) Hours Rate per = Accum. Book Expense Deprec. Value Used 2012 15,000 $ 0.12 $ 1,800 $ 1,800 $ 11,200 2013 30,000 0.12 3,600 5,400 7,600 2014 20,000 0.12 2,400 7,800 5,200 2015 25,000 0.12 3,000 10,800 2,200 2016 10,000 0.12 1,200 12,000 1,000 Chapter 9-27 Hour Annual Year 2012 Journal Entry x Illustration 9A-4 Depreciation expense Accumulated depreciation 1,800 1,800 SO 3 Compute periodic depreciation using the straight-line method, SO and contrast its expense pattern with those of other methods. and Accounting for Plant Assets Accounting for Plant Assets Illustration 9-12 Comparison of Depreciation Methods Illustration 9-13 Each method is acceptable because each recognizes the decline in service potential of the asset in a rational and systematic manner. Chapter 9-28 SO 3 Accounting for Plant Assets Accounting for Plant Assets Depreciation and Income Taxes IRS does not require taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements. IRS requires the straight-line method or a special accelerated-depreciation method called the Modified Accelerated Cost Recovery System (MACRS). MACRS is NOT acceptable under GAAP. Chapter 9-29 SO 3 Compute periodic depreciation using the straight-line metho...
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This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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