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# 9.5 Depreciation - PowerPoint PPT Presentation

9.5 Depreciation. Decreasing the value of a fixed asset over its useful life. What is Depreciation?. FIXED ASSETS Examples: Office Furniture Automobile Building Except Land We do not depreciate land. What do we Depreciate?.

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## PowerPoint Slideshow about ' 9.5 Depreciation' - ahanu

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### 9.5 Depreciation

• FIXED ASSETS

• Examples:

• Office Furniture

• Automobile

• Building

• Except Land

• We do not depreciate

land

What do we Depreciate?

Why do we Depreciate?

• Straight Line Depreciation over

- Divides up the net cost of the asset equally over the years of the assets life

• Declining Balance

- A method of calculating the annual depreciation of an asset as a fixed percentage of the remaining value of the asset

Methods of Depreciation

Estimate value of asset at end of its useful life

Cost – Salvage Value

Estimate life in years

Jan. 01, 2006

Cost of car \$20 000

Estimated Salvage Value \$5 000

Estimated Years of Life 5 Years

20 000 - 5 000

5 years

Straight Line

Keeps track of total deprecation 2006.  “CONTRA ASSET” (CR)

20 000 - 5 000

= 3 000

5 years

Expense  I/S

Salvage Value

Accumulated Depreciation

Automobile 20 000

Bank 20 000

Depreciation Expense- Auto 3 000

Accumulated Deprecation- Auto 3 000

Contra Asset

Depreciation Expense- Auto 3 000

Accumulated Deprecation- Auto 3 000

All the same!!

Bank 5 000

Acc. Dep.- Auto 15 000

Automobile 20 000

Government %, pg. 345 in text

+ 4 200

+ 2 940

+ 2 058

B) Declining Balance

+ 1 440.60

Depreciation Expense- Auto 6 000

Accumulated Deprecation- auto 6 000

Depreciation Expense- Auto 4 200

Accumulated Deprecation- auto 4 200

Depreciation Expense- Auto 2 940

Accumulated Deprecation- auto 2 940

• How much depreciation was used up in year 3?

• 2 940 (expense)

• Depreciation calculations are recorded in the Adjustment Columns on the worksheet. You must extend these entries to the appropriate columns!

Depreciation Expense- Auto will extend to the __ side of the __________ because it is treated like any other ______. (p. 343)

Accumulated Depreciation- Auto is extended to the __ side of the ____________. Accumulated Depreciation is an example of a _____ account because it has the opposite balance of normal assets. (p.344)

DR

Income Statement

Expense

Balance Sheet

CR

Contra

9.5 Depreciation pg. 336-348 Columns on the worksheet. You must extend these entries to the appropriate columns!

• Read p. 341-344 in textbook, review the worksheet, income statement & balance sheet

• Answer Exercise questions #1,2 p. 348-349 (t), p. 242-243 (w)

• Ex. # 3,4,6 p. 308-309 (t), p.219-222(w)

• Ex. 1 Parts A, B, C, D (P. Tang) p. 320 (t), p. 223-227 (w)

Let’s Try it!