BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4...
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Transcript of BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4...
![Page 1: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/1.jpg)
BAF3MCalculating
Depreciation II
![Page 2: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/2.jpg)
Homework check
Page 348 Exercise 1 (A,B,C)
Page 358 Exercise 4 (A,B)
![Page 3: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/3.jpg)
Homework: Page 348 Exercise 1 (A,B,C)
![Page 4: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/4.jpg)
Homework: Page 358 Exercise 4 (A,B)
![Page 5: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/5.jpg)
The TWO main ideas on how to calculate depreciation:
Straight Line Depreciation
Declining Balance Depreciation
![Page 6: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/6.jpg)
Straight Line Depreciation
original cost – residual value---------------------------------- years of life of the asset
(Straight line depreciation spreads the use of our asset evenly over the amount of time it is used.)
![Page 7: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/7.jpg)
Declining Balance
Let’s say we bought a car… does it lose its value evenly?
![Page 8: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/8.jpg)
Declining Balance
With declining balance, we take off a certain percentage each year.
Year 1 Depreciation= 30% * $100,000
car= $30,000
![Page 9: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/9.jpg)
Declining Balance
Year 2 Depreciation
Undepreciated Value of $70,000
x 30% = $21,000
![Page 10: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/10.jpg)
Declining Balance
Let’s look at a depreciation schedule…
Year30% Depreciation
UndepreciatedValue
0 $100,0001 $30,000 $70,0002 $21,000 $49,0003 $14,700 $34,3004 $10,290 $24,0105 $7,203 $16,807
30% is taken off each year
![Page 11: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/11.jpg)
Compare! (Straight Line vs. Declining Balance)
Year30% Depreciation
UndepreciatedValue
0 $100,0001 $30,000 $70,0002 $21,000 $49,0003 $14,700 $34,3004 $10,290 $24,0105 $7,203 $16,807
Year Straight LineUndepreciatedValue
0 $100,0001 $18,000 $82,0002 $18,000 $64,0003 $18,000 $46,0004 $18,000 $28,0005 $18,000 $10,000
* 10,000 residual value: 5 year useful life*
![Page 12: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/12.jpg)
The TWO main ideas on how to calculate depreciation:
Straight Line Depreciation
Declining Balance Depreciation
![Page 13: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/13.jpg)
NoteNote:DepreciationWith the exception of Land, all fixed assetsare expected to be ‘used up’ over a certainperiod of time. These assets decrease(or depreciate) in value.
Methods of DepreciationStraight-Line depreciation dividesthe price of an asset over its useful life. (minus itssalvage or residual value)
Declining Balance methoddecreases the value of an assetby a pre-determinedpercentage each fiscal period.
![Page 14: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/14.jpg)
The following ‘Depreciation Schedules’ compare the two approaches.
Year30% Depreciation
UndepreciatedValue
0 $100,0001 $30,000 $70,0002 $21,000 $49,0003 $14,700 $34,3004 $10,290 $24,0105 $7,203 $16,807
Year Straight LineUndepreciatedValue
0 $100,0001 $18,000 $82,0002 $18,000 $64,0003 $18,000 $46,0004 $18,000 $28,0005 $18,000 $10,000
* 10,000 residual value: 5 year useful life*
Declining Balance
![Page 15: BAF3M Calculating Depreciation II. Homework check Page 348 Exercise 1 (A,B,C) Page 358 Exercise 4 (A,B)](https://reader035.fdocuments.net/reader035/viewer/2022062601/5a4d1beb7f8b9ab0599e45f0/html5/thumbnails/15.jpg)
HomeworkPage 348, Exercise 1 (D,E) Exercise 2 (A,B)