This document discusses depreciation methods for fixed assets. It explains that depreciation allocates the cost of a fixed asset over the periods it is used. The main depreciation methods are straight-line, declining balance, units of production, and hours of use. The document also provides an example of calculating depreciation expense using the straight-line method based on the asset's cost, salvage value, and useful life.

1. Depreciation
Methods
Fixed Assets
and

2. Q:

3. Q:

4. Q:

5. Fixed
Assets
Expected to Benefit Future Periods
Actively Used in Operations
Tangible in Nature

6. Classifying Costs
Is the purchased
item long-lived?
Yes
Is the asset used in a
productive purpose?
No
Expense
Yes
Fixed Assets
No
Investment

7. Fixed Assets

8. Types of fixed assets
Land
Buildings
Machinery and Equipment
Cars, trucks, buses , etc ..
Furniture

9. Real estate
commissions
Brokerage
fees
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

10. Cost of purchase or
construction
Brokerage
fees
Taxes
Title fees
Attorney fees
Buildings
The cost of buildings include many costs;
the purchase price plus the following:
8-10

11. Purchase
price
Installing,
assembling, and
testing
Insurance while
in transit
Taxes
Transportation
charges
Machinery and
Equipment
8-11

12. Purchase
price
Installing,
assembling, and
testing
Insurance while
in transit
Taxes
Transportation
charges
Cars, trucks, buses ,
etc.
8-12

13. Purchase
price
Installing, and
assembling
Insurance while
in transit
Taxes
Transportation
charges
Furniture
8-13

14. Depreciation is the process of
allocating the cost of a Fixed
asset to expense in the
accounting periods benefiting
from its use.
Cost
Allocation
Acquisition
Cost
(Unused)
Balance Sheet
(Used)
Income Statement
Expense
What is the
Depreciation

15. Depreciation Methods
1. Straight Line.
2. Declining Balance.
3. Units Of Production.
4. Hours Of Use.

16. Q:

17. A: In Our
Company / Client
We Use Straight
Line Method On
Its Assets.

18. Factors in Computing
Depreciation
The calculation of depreciation
requires three amounts for each
asset:
1. Cost $50,000
2. Salvage Value $5,000
3. Useful Life 5 Years
8-18

19. Straight-Line Method
Cost - Salvage Value
Useful life
Depreciation
Expense for Period
=
$9,000
Depreciation
Expense per Year
=
$50,000 - $5,000
5 years
=
De. Cr.
Depreciation Expense 9,000
Accumulated Depreciation - Equipment 9,000
To record annual depreciation

20. Q:

21. A: Because our
government forces us
to use one method, a
straight-line method.

22. Q:

23. A: There are no
alternative method for
the Depreciation of
assets in our country.