Chapter 17 – Depreciation. In this chapter, the learning objectives are: 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. | Chapter 17 Depreciation Explain the concept and causes of depreciation Prepare a depreciation schedule and calculate partial-year depreciation Depreciation #17 Learning Unit Objectives Concepts of Depreciation and the Straight-Line Method Explain how use affects the units-of-production method Prepare a depreciation schedule Depreciation #17 Learning Unit Objectives Units-of-Production Method Explain the importance of residual value in the depreciation schedule Prepare a depreciation schedule Depreciation #17 Learning Unit Objectives Declining-Balance Method Explain the goals of ACRS and MACRS and their limitations Calculate depreciation using the MACRS guidelines Depreciation #17 Learning Unit Objectives Modified Accelerated Cost Recovery System (MACRS) with Introduction to ACRS Estimated Useful Life - Number of years or time periods for which the company can be use the asset Depreciation - An estimate of the use or deterioration of | Chapter 17 Depreciation Explain the concept and causes of depreciation Prepare a depreciation schedule and calculate partial-year depreciation Depreciation #17 Learning Unit Objectives Concepts of Depreciation and the Straight-Line Method Explain how use affects the units-of-production method Prepare a depreciation schedule Depreciation #17 Learning Unit Objectives Units-of-Production Method Explain the importance of residual value in the depreciation schedule Prepare a depreciation schedule Depreciation #17 Learning Unit Objectives Declining-Balance Method Explain the goals of ACRS and MACRS and their limitations Calculate depreciation using the MACRS guidelines Depreciation #17 Learning Unit Objectives Modified Accelerated Cost Recovery System (MACRS) with Introduction to ACRS Estimated Useful Life - Number of years or time periods for which the company can be 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 Residual Value (Salvage Value) - Expected cash value at the end of an assets useful life. Concept of Depreciation Book Value - The unused amount of the asset cost that may be depreciated in future accounting periods Book Value = Asset cost - Accumulated Book value Book value cannot be less than residual value Causes of Depreciation Product Obsolescence Physical Deterioration Straight-Line Method Distributes the same amount of expense to each period of time Depreciation expense = Cost - Residual value each year Estimated useful life in years Ajax Company buys equipment, the company estimates how many units the equipment can produce. Let’s assume the equipment has a useful life of 4,000 units. After 5 years the residual value is $500. Calculate depreciation expense and complete a depreciation .
