Unformatted text preview: 0 - $41,667) Cost Accumulated Depreciation Annual computation ignores residual value.
17 Double-Declining-Balance Method
Depreciation Depreciation Expense Expense (debit) (debit) $ $ $ $ 41,667 41,667 13,889 13,889 4,629 4,444 60,185 60,000 Accumulated Accumulated Undepreciated Undepreciated Depreciation Balance Depreciation Balance Balance (credit balance) (book value) (book value) $$ 62,500 62,500 $$ 41,667 20,833 41,667 20,833 55,556 6,944 55,556 6,944 60,185 2,315 60,000 2,500 Year Year 1 1 2 2 3 3 Below residual value Depreciation expense is limited to the amount that 2 $4,629 reduces book value-to the estimated residual value. = ($62,500 $55,556) Third Year 3 18 Partial Year Depreciation Calculations
When a plant asset is acquired during When a plant asset is acquired during the year, depreciation is calculated for the year, depreciation is calculated for the fraction of the year the asset is the fraction of the year the asset is owned. owned. June 30
19 Summary of Depreciation Methods 20 Tax Depreciation
For tax purposes, most corporations use the Modified Accelerated Cost Recovery System (MACRS). MACRS depreciation provides for rapid writeoff of an asset's cost in order to stimulate new investment. 21 Asset Impairment Losses
Impairment is the loss of a significant portion of the utility of an asset through . . . Casualty. Obsolescence. Lack of demand for the asset's services. A loss should be recognized when an asset suffers a permanent impairment. Cedar Fair recorded a write-down of $3,200,000 on equipment. 1
2 Analyze Record
22 23 24 Disposal of Tangible Assets
Cedar Fair sold a hotel for $3,000,000 cash at the end of its 16th year of use. The hotel originally cost $20,000,000, and was depreciated using the straight-line method with zero residual value and a useful life of 20 years. The amount of depreciation per year is: The amount of depreciation per year is:
a. a. b. b. c. c. d. d. $0. $0. $500,000. $500,000. $1,000,000. $1,000,000. $2,000,000. $2,000,000. Annua...
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