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Lecture Practical business math procedures (11/e) - Chapter 17: Depreciation

Lecture Practical business math procedures (11/e) - Chapter 17: Depreciation. The main contents of this chapter include all of the following: Concepts of depreciation and the straight-line method, units-of-production method, declining-balance method, modified accelerated cost recovery system (MACRS) with introduction to ACRS. | DEPRECIATION Chapter Seventeen Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Explain the concept and causes of depreciation. Prepare a depreciation schedule and calculate partial-year depreciation. LU 17-1: Concepts of Depreciation and the Straight-Line Method Learning unit objectives LU 17-2: Units-of-Production Method Explain how use affects the units-of-production method. Prepare a depreciation schedule. LU 17-3: Declining-Balance Method Explain the importance of residual value in the depreciation schedule. Prepare a depreciation schedule. LU 17-4: Modified Accelerated Cost Recovery System (MACRS) with Introduction to ACRS Explain the goals of ACRS and MACRS and their limitations. Calculate depreciation using the MACRS guidelines. 2 17- Accounting equation and Balance Sheet Balance Sheet: Gives a financial picture of what a company is worth as of particular date. Assets Liabilities + Owner’s Equity = (How much the company owns) (How . | DEPRECIATION Chapter Seventeen Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Explain the concept and causes of depreciation. Prepare a depreciation schedule and calculate partial-year depreciation. LU 17-1: Concepts of Depreciation and the Straight-Line Method Learning unit objectives LU 17-2: Units-of-Production Method Explain how use affects the units-of-production method. Prepare a depreciation schedule. LU 17-3: Declining-Balance Method Explain the importance of residual value in the depreciation schedule. Prepare a depreciation schedule. LU 17-4: Modified Accelerated Cost Recovery System (MACRS) with Introduction to ACRS Explain the goals of ACRS and MACRS and their limitations. Calculate depreciation using the MACRS guidelines. 2 17- Accounting equation and Balance Sheet Balance Sheet: Gives a financial picture of what a company is worth as of particular date. Assets Liabilities + Owner’s Equity = (How much the company owns) (How much the owner is worth) (How much the company owes) Accounting Equation: Assets = Liabilities + Owner’s Equity 3 Estimated Useful Life – Number of years or time periods for which the company can use the asset Depreciation – An estimate of the use or deterioration of an asset Asset Cost – Amount paid for an asset including freight charges Concept of Depreciation Accumulated Depreciation – The total amount of the asset’s depreciation taken to date 4 Residual Value (Salvage Value) - Expected cash value at the end of an asset’s useful life. Concept of Depreciation Book Value - The unused amount of the asset cost that may be depreciated in future accounting periods. Book value cannot be less than residual value. Book value = Asset cost -- Accumulated book value 5 Causes of Depreciation Product Obsolescence Physical Deterioration 6 Straight-Line Method Distributes the same amount of expense to each period of time. Depreciation expense = Cost -- Residual value each year Estimated useful life .