Fixed assets and depreciation methods
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This document discusses depreciation methods for fixed assets. It explains that depreciation allocates the cost of a fixed asset over the periods it is used. The main depreciation methods are straight-line, declining balance, units of production, and hours of use. The document also provides an example of calculating depreciation expense using the straight-line method based on the asset's cost, salvage value, and useful life.
Fixed assets and depreciation methods
- 2. Q:
- 3. Q:
- 4. Q:
- 5. Fixed Assets Expected to Benefit Future Periods Actively Used in Operations Tangible in Nature
- 6. Classifying Costs Is the purchased item long-lived? Yes Is the asset used in a productive purpose? No Expense Yes Fixed Assets No Investment
- 7. Fixed Assets
- 8. Types of fixed assets Land Buildings Machinery and Equipment Cars, trucks, buses , etc .. Furniture
- 9. Real estate commissions Brokerage fees Taxes legal fees Attorney fees Land The cost of land include many costs; the purchase price plus the following: 8-9 Land is not a depreciable Asset Payments for surveying, cleaning
- 10. Cost of purchase or construction Brokerage fees Taxes Title fees Attorney fees Buildings The cost of buildings include many costs; the purchase price plus the following: 8-10
- 11. Purchase price Installing, assembling, and testing Insurance while in transit Taxes Transportation charges Machinery and Equipment 8-11
- 12. Purchase price Installing, assembling, and testing Insurance while in transit Taxes Transportation charges Cars, trucks, buses , etc. 8-12
- 13. Purchase price Installing, and assembling Insurance while in transit Taxes Transportation charges Furniture 8-13
- 14. Depreciation is the process of allocating the cost of a Fixed asset to expense in the accounting periods benefiting from its use. Cost Allocation Acquisition Cost (Unused) Balance Sheet (Used) Income Statement Expense What is the Depreciation
- 15. Depreciation Methods 1. Straight Line. 2. Declining Balance. 3. Units Of Production. 4. Hours Of Use.
- 16. Q:
- 17. A: In Our Company / Client We Use Straight Line Method On Its Assets.
- 18. Factors in Computing Depreciation The calculation of depreciation requires three amounts for each asset: 1. Cost $50,000 2. Salvage Value $5,000 3. Useful Life 5 Years 8-18
- 19. Straight-Line Method Cost - Salvage Value Useful life Depreciation Expense for Period = $9,000 Depreciation Expense per Year = $50,000 - $5,000 5 years = De. Cr. Depreciation Expense 9,000 Accumulated Depreciation - Equipment 9,000 To record annual depreciation
- 20. Q:
- 21. A: Because our government forces us to use one method, a straight-line method.
- 22. Q:
- 23. A: There are no alternative method for the Depreciation of assets in our country.