中级财务会计英文ch06.ppt

( ) Book Value × 2 × Useful Life in Years 100% ( ) $50,000 × 2 × 5 years 100% = $20,000 2nd year depreciation: ( ) ($50,000 - $20,000) × 2 × 5 years 100% = $12,000 1st year depreciation: Double-Declining-BalanceExample ( ) Book Value × 2 × Useful Life in Years 100% ( ) $50,000 × 2 × 5 years 100% = $20,000 ( ) ($50,000 - $20,000) × 2 × 5 years 100% = $12,000 2nd year depreciation: 1st year depreciation: Double-Declining-BalanceExample Let’s calculate depreciation expense for the life of the asset using DDB. Double-Declining-BalanceExample We usually have to force depreciation expense in the latter years to an amount that brings BV to residual value. Double-Declining-BalanceExample The total amount of depreciation recorded over the useful life of an asset is the same regardless of the method used. Depreciation expense recorded in any one period will vary according to method used. The straight-line method isused by about 95 percent ofcompanies because it is easyto use and to explain. Comparison of Methods Life in Years Depreciation Comparison of Methods:Straight-Line Method Life in Years Depreciation Comparison of Methods:Productive Output Method Life in Years Depreciation Comparison of Methods:Sum-of-the-Years’ Digits Method Life in Years Depreciation Comparison of Methods:Double-Declining-Balance Method Depreciation Expense $ 2006 2007 2008 2009 2010 During Year Straight-Line Sum-of-the-Years-Digits Double-Declining-Balance Conceptual Evaluation of Depreciation Methods Book Value $ 2006 2007 2008 2009 2010 At End of Year Straight-Line Sum-of-the-Years-Digits Double-Declining-Balance Conceptual Evaluation of Depreciation Methods For an asset purchased in 1987 and later, the Modified Accelerated Cost Recovery System (MACRS) is required for tax purposes. A mandated tax life, which is usually shorter than the economic life. MACRS provides for rapid write-off of an asset’s cost in order to stimulate investment in m