Fixed assets and depreciation methods
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Transcript of Fixed assets and depreciation methods
Depreciation Methods
Fixed Assets and
Q: What Depreciation Method Does
Our Company / Client Use On Its
Assets ?
Q: Why has your Company /
Client chosen that metod ?
Q: What Are The Alternatives In
Our Country For Depreciation
Assets ?
THEY ARE NOT HELD FOR SALE
Fixed Assets
Expected to Benefit Future Periods
Actively Used in Operations
Tangible in Nature
Classifying Costs
Is the purchased item long-lived?
Yes
Is the asset used in a productive purpose?
No
Expense
Yes
Fixed Assets
No
Investment
Decline in asset value over
its useful life
Fixed Assets
Types of fixed assetsLandBuildingsMachinery and EquipmentCars, trucks, buses , etc ..Furniture
Real estate commissions
Brokeragefees
Taxes
legal fees
Attorney fees
Land
The cost of land include many costs; the purchase price plus the following:
8-9
Land is not a depreciable Asset
Payments for surveying, cleaning
Cost of purchase or construction
Brokeragefees
Taxes
Title fees
Attorney fees
BuildingsThe cost of buildings include many costs; the purchase price plus the following:
8-10
Purchaseprice
Installing,assembling, and
testingInsurance while
in transit
Taxes
Transportationcharges
Machinery and Equipment
8-11
Purchaseprice
Installing,assembling, and
testing
Insurance whilein transit
Taxes
Transportationcharges
Cars, trucks, buses , etc.
8-12
Purchaseprice
Installing, andassembling
Insurance whilein transit
Taxes
Transportationcharges
Furniture
8-13
Depreciation is the process of allocating the cost of a Fixed
asset to expense in the accounting periods benefiting
from its use .
CostAllocation
AcquisitionCost
(Unused)
Balance Sheet
(Used)
Income Statement
Expense
What is the Depreciation
Depreciation Methods1. Straight Line.2. Declining Balance.3. Units Of Production.4. Hours Of Use.
Q: What Depreciation Method Does
Our Company / Client Use On Its
Assets ?
A: In Our Company /
Client We Use Straight Line Method On Its
Assets.
Factors in Computing Depreciation
The calculation of depreciation requires three amounts for each asset:
1. Cost $50,0002. Salvage Value $5,0003. Useful Life 5
Years8-18
Straight-Line MethodCost - Salvage Value
Useful life Depreciation
Expense for Period=
9,000$ DepreciationExpense per Year
= 50,000$ - 5,000$5 years =
De. Cr.Depreciation Expense 9,000
Accumulated Depreciation - Equipment 9,000 To record annual depreciation
Q: Why has your Company /
Client chosen that metod ?
A: Because our government forces
us to use one method, a
straight-line method.
Q: What Are The Alternatives In
Our Country For Depreciation
Assets ?
A: There are no alternative method for the Depreciation
of assets in our country.