"Depreciation" Essays and Research Papers

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INTRODUCTION Depreciation expense is an accounting and financial reporting practice, used primarily by businesses that pay tax on income. On the income statement, this expense appears as a charge against income, that is, it is subtracted from sales revenues to produce a lower reported income. Over the years and at different periods in time, depreciation has meant different things to different people. According to International Accounting Standard (IAS) depreciation is the allocation of the depreciable...

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Depreciation and Value

Company A recognizes depreciation to the nearest whole month. Calculate the depreciation expenses for 2011, 2012, 2013 using straight line depreciation method. Solution: Cost = $140,000 Salvage value = $20,000 Useful life = 5 year Annual depreciation = Cost - salvage valueuseful life = 140,000-20,000 5 = 120,0005 = $24000 Annual rate of depreciation = annual depreciationtotal depreciation×100% ...

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Depreciation Methods

Depreciation Methods Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. Factors Involved in the Depreciation Process 1. What depreciable base is to be used for the asset? 2. What is the asset’s useful life? 3. What method of cost apportionment is best for the asset? Depreciable Base for the Asset The base established for depreciation is a function...

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Total Depreciation

straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. Prepare the journal entry to record the sale. Assuming the company’s year end is March 31. Depreciation for 2007-08: ((80000-5000)/5) X 9/12 = 11250 Depreciation for 2008-09: ((80000-5000)/5) = 15000 Depreciation for 2009-10: ((80000-5000)/5) = 15000 Depreciation for 2010-11: ((80000-5000)/5) = 15000 Total Depreciation 46250 Carrying...

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Essay on Depreciation Methods

Memorandum To: From: Subject: Depreciation Value of your Special Purpose Machine Date: Congratulations on your purchase of this special purpose machine. With every purchase of a new machinery comes the depreciation value of the machine. In order to report the value of this machine, we first must figure out the total amount paid for your machine. It says here you purchased the machine for an invoice price of $1,200,000 and the freight cost was $6000 and the cost for installation was $64000...

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Depreciation and Cost

cost of the machine since these costs are required in order to get the machine ready for use. I will calculate depreciation based on the machine’s practical capacity over its estimated life, instead of double declining method. It seems that the use of double declining balance method of depreciation is inappropriate for allocation of costs because this method incurs higher depreciation in the early years, although the utilization is lower in the early years. By using practical capacity as the base...

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Straight-line Depreciation

allocation of the asset is shown through the method of depreciation a company uses. The method a company chooses to incorporate should be one that most effectively matches expenses with the revenues produced. The method that most select is that of straight-line depreciation, which "spreads the depreciable value evenly over the useful life of an asset." (Horngren, Sundem, Elliott, & Philbrick 2006, p.342) Depreciation schedules reflect how much depreciation will be allocated for each year of the assets...

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Depreciation and New Equipment

enacted, or if the new legislation is enacted and the capital project is contracted early enough so that it is grandfathered in. With tax legislation grandfathered, the project gets the benefit of the new lower corporate tax rate and the old ACRS depreciation method. Although when presented with this project one year ago in 1984, Paperco was able to be postponed this capital project since it was merely “moderately attractive”. The prospect of new tax legislation being enacted as rumored makes the Net...

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Discuss the Importance of Depreciation.

Discuss the importance of depreciation expenses. Depreciation as a concept and in practice plays a very important role in a company's cash flow hence in funding. The reason's are basically two, firstly because depreciation is a way of self finance for an organization and secondly because is a way of decreasing taxes that the government claims as the company doesn't have to pay taxes on depreciation which consequently enlarges the cash flow of the company. As a term depreciation in accounting is the...

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Depreciation and Sale of Asset

Depreciation is the decline in the future economic benefits of a depreciable non-current asset through wear and tear and obsolescence. It is an allocation process. It can be calculated by two main methods, each reflecting in a distinct prospect in the way the asset is used. Depreciation is to be treated as an estimated expense that does not set aside cash for the replacement of a non-current asset. In determining the cost of acquisition of the lathes, any capital expenditure made must be added...

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