Depreciation methods

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Depreciation methods

  1. 1. Presented By:Sunny KhatanaComputer Science Engg.University Of Gujrat
  2. 2.  A reduction in the value of an asset with the passageof time, due in particular to wear and tear.Defination
  3. 3. Here The Four Methods are described: Straight Line Method MACR’S Method Double Decline Method Sum Of The Year MethodMethods
  4. 4. Cost of Asset=10,500Salvage Value/Residual Value=500Life years=5Straight Line Method
  5. 5. 10,000 cost - 500 salvage value/5 = 2000 per yearyear cost Depreciation Accumulated BookExpense Depreciation Value 1 10,500 2,000 2,000 8,500 2 10,500 2,000 4,000 6,500 3 10,500 2,000 6,000 4,500 4 10,500 2,000 8,000 2,500 5 10,500 2,000 10,000 0
  6. 6. cost =2,50,000year cost Depreciation Accumulated BookExpense Dep value 1 250000*35% 87,500 87,500 162500 2 250000*15% 37500 12500 125000 3 250000*20% 50000 175000 75000 4 250000*15% 37500 212500 37500 5 250000*15% 37500 250000 0MACR’S(Modified Accelerated cost Recovery System)
  7. 7. HereYear= 6n=6n(n+1)/2= 6(6+1)/2= 42/2 =21Cost= 2,50,000Also6+5+4+3+2+1=21Sum Of the Year By DigitMethod
  8. 8. Cost Depreciation Accumulated BookDep value250000*6/21 71428.57 71428.57 178571.43250000*5/21 59523.80 130952.37 119047.63250000*4/21 47619.04 178571.41 71428.59250000*3/21 35714.28 214285.69 3571.31250000*2/21 23809.52 238095.21 11904.76250000*1/21 11904.76 2,50,000 0
  9. 9. Cost of asset = $100,000Estimated residual value = $10,000Estimated useful life of asset = 5 yearsDepreciation rate = (1/useful life) x 200%= 1/5 x 200% = 20% x 2 = 40%Double Declining BalanceMethod
  10. 10. Cost Depreciation Accumulated BookDep value100000*40% 40000 40000 6000060,000*40% 24000 64000 3600036000*40% 14400 78400 2160021600*40% 8640 87040 1296012960*40% 2960(*) 90000 10000(*)Depreciation stops when book value=Residual value

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