Depreciation Methods

Fixed Assets and

Q: What Depreciation Method Does

Our Company / Client Use On Its

Assets ?

Q: Why has your Company /

Client chosen that metod ?

Q: What Are The Alternatives In

Our Country For Depreciation

Assets ?

THEY ARE NOT HELD FOR SALE

Fixed Assets

Expected to Benefit Future Periods

Actively Used in Operations

Tangible in Nature

Classifying Costs

Is the purchased item long-lived?

Yes

Is the asset used in a productive purpose?

No

Expense

Yes

Fixed Assets

No

Investment

Decline in asset value over

its useful life

Fixed Assets

Types of fixed assetsLandBuildingsMachinery and EquipmentCars, trucks, buses , etc ..Furniture

Real estate commissions

Brokeragefees

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

Cost of purchase or construction

Brokeragefees

Taxes

Title fees

Attorney fees

BuildingsThe cost of buildings include many costs; the purchase price plus the following:

8-10

Purchaseprice

Installing,assembling, and

testingInsurance while

in transit

Taxes

Transportationcharges

Machinery and Equipment

8-11

Purchaseprice

Installing,assembling, and

testing

Insurance whilein transit

Taxes

Transportationcharges

Cars, trucks, buses , etc.

8-12

Purchaseprice

Installing, andassembling

Insurance whilein transit

Taxes

Transportationcharges

Furniture

8-13

Depreciation is the process of allocating the cost of a Fixed

asset to expense in the accounting periods benefiting

from its use .

CostAllocation

AcquisitionCost

(Unused)

Balance Sheet

(Used)

Income Statement

Expense

What is the Depreciation

Depreciation Methods1. Straight Line.2. Declining Balance.3. Units Of Production.4. Hours Of Use.

Q: What Depreciation Method Does

Our Company / Client Use On Its

Assets ?

A: In Our Company /

Client We Use Straight Line Method On Its

Assets.

Factors in Computing Depreciation

The calculation of depreciation requires three amounts for each asset:

1. Cost $50,0002. Salvage Value $5,0003. Useful Life 5

Years8-18

Straight-Line MethodCost - Salvage Value

Useful life Depreciation

Expense for Period=

9,000$ DepreciationExpense per Year

= 50,000$ - 5,000$5 years =

De. Cr.Depreciation Expense 9,000

Accumulated Depreciation - Equipment 9,000 To record annual depreciation

Q: Why has your Company /

Client chosen that metod ?

A: Because our government forces

us to use one method, a

straight-line method.

Q: What Are The Alternatives In

Our Country For Depreciation

Assets ?

A: There are no alternative method for the Depreciation

of assets in our country.