Principles Of Accounting(会计学原理)Chapter-10.ppt

* Part I Depreciation expense for any given period is determined by taking the asset’s cost less its estimated salvage value and dividing this amount by the asset’s estimated useful life. If we calculate annual depreciation, we would express the useful life in years. Let’s use our specific example to calculate annual straight-line depreciation. Part II As you can see, straight-line depreciation is $1,800 per year. We subtract the salvage value of $1,000 from the cost of the machinery and divide that amount by 5 years. Now let’s make the journal entry to record depreciation expense. Part II To record annual depreciation on this asset we debit Depreciation Expense for $1,800, and credit Accumulated Depreciation – Machinery for the same amount. Accumulated depreciation is another contra asset account. Accumulated depreciation is subtracted from the cost of the asset to arrive a what is called book value. The book value is the amount shown on the balance sheet. * In this graph of each year’s depreciation expense, you can clearly see the straight-line nature of the method. Now we have a graph of the asset’s book value at the end of each year. Once again, we have a straight line that slopes down and to the left. You can see that the contra asset account, accumulated depreciation, is subtracted for the cost of the machinery on the balance sheet. The book value of $8,200 is disclosed. * Under the units-of-production method, the first step is to calculate the depreciation expense per unit of production. Take the asset’s cost less its salvage value and divide this amount by the total estimated number of units that will be produced by the assets. Once we complete the first step, we may calculate depreciation expense for the period. Multiply the depreciation expense per unit that we determined in step one by the number of units produced in the current period. Let’s look at a specific example. * Let’ calculate depreciation in 2009 for our machinery. Assume 7,000 units were i