Farmacy

Aug 2 2017

Depreciation Methods, Accounting #financial #statements, #balance #sheet, #income #statement, #statement #of #cash #flows, #assets, #liabilities,


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(*1) $140,000 x 40% x 9/12 = $42,000
(*2) $98,000 x 40% x 12/12 = $39,200
(*3) $58,800 x 40% x 12/12 = $23,520
(*4) $35,280 x 40% x 12/12 = $14,112
(*5) $21,168 x 40% x 12/12 = $8,467

— Depreciation for 2015 is $1,168 to keep book value same as salvage value.
— $21,168 – $20,000 = $1,168 (At this point, depreciation stops.)

[Example, 150% declining balance depreciation]

On April 1, 2011, Company A purchased an equipment at the cost of $140,000. This equipment is estimated to have 5 year useful life. At the end of the 5th year, the salvage value (residual value) will be $20,000. Company A recognizes depreciation to the nearest whole month. Calculate the depreciation expenses for 2011, 2012 and 2013 using double declining balance depreciation method.

Useful life = 5 years — Straight line depreciation rate = 1/5 = 20% per year

Depreciation rate for double declining balance method
= 20% x 150% = 20% x 1.5 = 30% per year

Depreciation for 2011
= $140,000 x 30% x 9/12 = $31,500

Depreciation for 2012
= ($140,000 – $31,500) x 30% x 12/12 = $32,550

Depreciation for 2013
= ($140,000 – $31,500 – $32,550) x 30% x 12/12 = $22,785

150% Declining Balance Depreciation Method

Book Value
at the beginning


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