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buad 121 - ch 10 PPE

PPE depreciation formulas

QuestionAnswer
What is the straight line method formula? Cost - Salvage/Life
What is the declining balance method formula? Cost - Salvage/Life
How do you get the NBV for the first year? It is the Cost amount
How do you get the NBV for the 2nd and remaining years using declining method? Ending NBV becomes the Beg NBV of the next year
What is the double declining balance method formula? 2/Life
Do you deduct the salvage value for double declining? No, do not include the salvage amount for double declining method.
Do you deduct the salvage value for declining? No, do not include the salvage amount for declining method.
What is lump sum purchase method? Add all purchase amounts up, divide the individual purchase amount(s) paid into the total amount paid, this will give you a percentage, multiply % by total amount paid.
What happens when the depreciation expense amount falls below the salvage amount? You need to stop at the salvage amount regardless if a whole years worth of depreciation isn't claimed.
Do you round off when using the double declining method? No, use the whole number calculated
What type of company would use the units of production method? Mines, timberlands, factories
What is the units of production method formula? Cost - Salvage/Estimated units
How do you calculate for a purchase made part way through a year? Find your depreciation expense amount for one full year, then multiply it by the amount of the year you had the asset.
What is PPE made up of? Land, buildings, equipment, machinery & leasehold improvements
Created by: buad ok college