Slide 9-16 Depreciation Book Value e Cost-Accumulated Depreciation > Accumulated Depreciation Contra-asset Represents the portion of an asset fa cost that has already been allocated to expense >Causes of Depreciation ● Physical deterioration ● Obsolescence Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 9-16 Irwin/McGraw-Hill Book Value Cost - Accumulated Depreciation Accumulated Depreciation Contra-asset Represents the portion of an asset 抯 cost that has already been allocated to expense. Causes of Depreciation Physical deterioration Obsolescence Depreciation
Slide 9-17 Straight-Line Depreciation Depreciation Cost- Residual value Expense per Year Life in Years Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 9-17 Irwin/McGraw-Hill Cost - Residual Value Life in Years Depreciation Expense per Year = Straight-Line Depreciation
Slide 9-18 Straight-Line method Example On January 1, 1998, Bass Co buys a new boat. Bass Co pays $24,000 for the boat the boat has an estimated residual value of $ 3, 000 and an estimated useful life of 5 years Compute depreciation for 1998 using the straight-line method Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 9-18 Irwin/McGraw-Hill Straight-Line Method Example On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 1998 using the straight-line method
Slide 9-19 Straight-Line method Example On January 1, 1998, Bass Co buys a new boat. Bass Co pays $24,000 for the boat the boat has an estimated residual value of $ 3, 000 and an estimated useful life of 5 years Compute depreciation for 1998 using the straight-line method Cost Residual Value 24,000 $ 3,000 Years of useful life 5 s 4, 200 per year Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 9-19 Irwin/McGraw-Hill Straight-Line Method Example Cost ? Residual Value $ 24,000 ? $ 3,000 = $ 4,200 per year Years of Useful Life = 5 On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 1998 using the straight-line method
Slide 9-20 Straight-Line method Example Bass Co. will record $4, 200 depreciation each year for five years. Total depreciation over the estimated useful ife of the boat is. Depreciation Accumulated Accumulated Undepreciated Expense Depreciation De preciation Balance Year(debit) (credit) Balance (book value) 24.000 1998$4,200$ 4200$ 4,200 19,800 1999 4,200 4,200 8400 15,600 2000 4,200 4,200 2, 11,400 2001 4,200 4,200 16,800 7,200 2002 4,200 4,200 21,000 3.000 $21,000$21,000 Salvage Value Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 9-20 Irwin/McGraw-Hill Straight-Line Method Example Bass Co. will record $4,200 depreciation each year for five years. Total depreciation over the estimated useful life of the boat is: Depreciation Accumulated Accumulated Undepreciated Expense Depreciation Depreciation Balance Year (debit) (credit) Balance (book value) $ 24,000 1998 $ 4,200 $ 4,200 $ 4,200 19,800 1999 4,200 4,200 8,400 15,600 2000 4,200 4,200 12,600 11,400 2001 4,200 4,200 16,800 7,200 2002 4,200 4,200 21,000 3,000 $ 21,000 $ 21,000 Salvage Value