ELEMENTS OF DEPRECIATION COMPUTATION Depreciation accounting may be defined as a systematic procedure for allocating the cost of a long-lived asset over its useful life. The determination of the depreciation expense of a period depends on three basic elements. These are: • Depreciation Base. The cost to be allocated over the period of use is known as the depreciation base. This consists of the initial purchase cost of the asset minus any salvage value expected at the time of retirement plus
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Depreciation is the decline in the future economic benefits of a depreciable non-current asset through wear and tear and obsolescence. It is an allocation process. It can be calculated by two main methods‚ each reflecting in a distinct prospect in the way the asset is used. Depreciation is to be treated as an estimated expense that does not set aside cash for the replacement of a non-current asset. In determining the cost of acquisition of the lathes‚ any capital expenditure made must be added
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new machine that costs $100‚000 and requires installation costs of $10‚000. The new machine would have a 5-year usable life and would be depreciated under MACRS using a 5-year recovery period. The firm’s projected revenues and expenses (excluding depreciation and interest)‚ if it requires the machine‚ would be as follows: Year Revenue Expenses (Excl‚ depr‚ and int.) 1 $1‚000‚000 $764‚500 2 1‚175‚000 839‚800 3 1‚130‚000 914‚900 4 1‚425‚000 989‚900 5 1‚550‚000 998‚900 The new machine
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the importance of depreciation expenses. Depreciation as a concept and in practice plays a very important role in a company ’s cash flow hence in funding. The reason ’s are basically two‚ firstly because depreciation is a way of self finance for an organization and secondly because is a way of decreasing taxes that the government claims as the company doesn ’t have to pay taxes on depreciation which consequently enlarges the cash flow of the company. As a term depreciation in accounting is the
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Differentiating Depreciation Methods Straight-line method of depreciation is where the depreciation is charged as long as you have an asset. However‚ an accelerated method of depreciation is where the depreciation that you have charged the amount will decline over a period of time. In straight-line method in order for you to get the depreciation amount the asset is subtracted from its cost. In the mean time‚ accelerated method is charged in the beginning of the life time but in the end it
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Depreciation of Fixed Assets Depreciation A business may acquire fixed assets such as land‚ buildings‚ machinery‚ office equipment‚ delivery equipment and natural resources (e.g. a piece if mining land)to help in the process of its operations to earn revenue in order to make a profit. Such assets‚ by their very nature‚ provide benefits to the business for more than one financial year or period. In fact‚ when a business buys a fixed asset at a certain cost (say $10‚000)‚ it is actually buying
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Memorandum To: From: Subject: Depreciation Value of your Special Purpose Machine Date: Congratulations on your purchase of this special purpose machine. With every purchase of a new machinery comes the depreciation value of the machine. In order to report the value of this machine‚ we first must figure out the total amount paid for your machine. It says here you purchased the machine for an invoice price of $1‚200‚000 and the freight cost was $6000 and the cost for installation was $64000
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Accounting Questions – Depreciation About http://www.HelpWithAssignment.com We are a bunch of talented and ambitious people from around the world. Our network spans 3 continents and several countries. This is necessary to service requests from different time zones. www.HelpWithAssignment.com has provided a platform for talented individuals to come together to help individuals do well in their assignments‚ homework‚ thesis‚ term papers and projects while earning a valuable side income. Question-
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production output over this period was: Year 1‚ 35 000 units; Year 2‚ 35 000 units; Year 3‚ 18 000 units; Year 4‚ 12 000 units. The asset cost $ 100 000 and associated installation costs amounted to $20 000 and residual value is $5000. The amount of depreciation charged in the first year is: Selected Answer: c. $42 000 Correct Answer: b. $40 250 Question 5 0 out of 1 points If a sale and leaseback transaction results in a finance lease‚ IAS 17 Leases‚ provides the following accounting treatment
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2003 Total impact stadium on Income Statement 2003 ($ ($ ($ 0.5) 0.125) 0.625) $ 131 $ 130.375 Cash Flows 2003 (stadium‚ year ended December 31‚ Indirect Method‚ millions) To come to total Cash Flows the adjustments are: adjustment depreciation expense adjustment for provision demolition expense adjustment investment land adjustment investment new stadium adjustment disinvestment old stadium $ 0.5 $ 0.125 ($ 12)
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