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Supplement I. Fixed asset and Depreciation Methods 固定资产和折旧方法. Classification of Assets. Current Assets( 流动资产 ) are assets which can be converted into Cash or consumed within one year or the normal Operating cycle of the business. Fixed Assets ( 固定资产 )or long-term assets ,refer to
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Supplement I Fixed asset and Depreciation Methods 固定资产和折旧方法
Classification of Assets Current Assets(流动资产) are assets which can be converted into Cash or consumed within one year or the normal Operating cycle of the business Fixed Assets (固定资产)or long-term assets ,refer to those relatively long-lived assets which are held by a business for use in its operation
Depreciation Method of Plant Asset Straight-line method 直线法 Sum- of-the- years’-digits method 年数总和法 Double-declining-balance Method 双倍余额递减法
Depreciation Book Value帐面净值 Cost - Accumulated Depreciation Accumulated Depreciation累计折旧 Represents the portion of an asset’s cost that has already been allocated to expense. Book value of last year =salvage value
Sum-of-the-Years’-Digits Method Depreciation in the early years of an asset’s estimated useful life is higher than in later years. the years in reverse order The sum of number of years
Sum-of-the-Year-DigitsExample On January 1, 2005, 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 2005 using the Sum-of-Years-Digits method.
Sum-of-the-Year-DigitsExample On January 1, 2005, 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 2005 using the Sum-of-the-Year-Digits method. 2005 Dep expense=( Cost - Residual Value )*Dep Rate of 2005 =(24000-3000)*5/15 =7000
Sum-of-the-Year-DigitsExample Compute depreciation for the rest of the boat’s estimated useful life.
Sum-of-the-Years-Digits BalanceGraph of Depreciation Expense
Accelerated Method • Example on textbook ,p78
Double-Declining BalanceExample Depreciation in the early years of an asset’s estimated useful life is higher than in later years. The double-declining balance accelerated depreciation rate is 200% of the straight-line depreciation rate of 1/Useful Life.
Double-Declining BalanceExample Depreciation in the early years of an asset’s estimated useful life is higher than in later years. The book value at the beginning of the year
Double-Declining BalanceExample On January 1, 2005, 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 2005 using the double-declining balance method.
Double-Declining BalanceExample On January 1, 2005, 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 2005 using the double-declining balance method.
Double-Declining BalanceExample Compute depreciation for the rest of the boat’s estimated useful life.
Double-Declining BalanceExample Compute depreciation for the rest of the boat’s estimated useful life.
Double-Declining BalanceExample Compute depreciation for the rest of the boat’s estimated useful life.
Double-Declining BalanceExample Total depreciation over the estimated useful life of an asset is the same using either the straight-line method or the declining-balance method.
Accelerated Method • Example on textbook,p79
Double-Declining BalanceExample Compute depreciation for the equipment.
Double-Declining BalanceExample Compute depreciation for the equipment.
Exercise • Jon Seceda furnace Corp. purchased machinery for $ 50,000 at the beginning of the year 1.It is estimated that it will have a useful life of 5 years , residual value of $5000.compute the depreciation under the each of the following method (round to two decimal places) • Sum-of-years’-digits • Double-declining balance
Exercise • Jon SECEDA furnace corp. purchased machinery for $315,000 on April 1,2004. It is estimated that it will have a useful life of 10 years , scrap value of $ 15000 • From the information given , compute the depreciation charge in 2004 under each of the following method( round to three decimal places) • straight-line • sum-of-years’-digits • Double-decline balance
Exercise • [(315000-15000) ×1/10] ×9/12=22500 • [(315000-15000)×10/55]×9/12=40909.09 • [(315000×2/10] ×9/12=47250
Depreciation Book Value帐面净值 Market Value/ fair Value 市场价值 /公允价值 the price which the assets are exchanged in the market Book Value =Market Value
assignment Problems 2 ( p 81) Problems 1 ( p 80)