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.
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
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
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