F3 M5

Answer 1

Physical depr is calculated from the useful life of an asset

Answer 2

Functional depr is calculated by the risk of obsolescence of an asset

Answer 3

Immaterial salvage values may be ignored

Answer 4

Component (separate depr of each part of a fixed asset and all of those amts added tg)
and composite/group (depreciating an entire class of a fixed asset over each of their
useful lives) depr are two alternative depr methods used

Answer 5

In group depr, I would divide each asset by their useful lives to get the annual depr for
that specific asset. Add up all of them to get annual depr for that asset class

Answer 6

Depr base = cost - salvage val

Answer 7

SLN can be used to calculate straight-line in excel

Answer 8

Sum-of-the-years-digits = SYD in excel (it will say cost, salvage, life, per). Per in the
equation = the period. This is the period in which I am calculating the depr (per 1, 2, 3,
4). It will keep increasing and will be the only # that is different than the rest each year

Answer 9

Double-declining balance = DDB in excel (it will say the same thing as SYD)

Answer 10

In DDB, the NBV (original BV - acc depr each year) can not be less than the salvage val.
In fact, if doing this formula by hand, the salvage val isn’t included in the calculation

Answer 11

Units-of-production depr = (cost - salvage val) / estimated # of units = rate p/unit

Answer 12

I will then multiply this # by the number of hours worked or units produced to get depr
exp p/year

Answer 13

Partial year depr can be chosen as well (half depr exp in 1st year and half in last year)

Answer 14

To find half year depr, take full year depr and divide by 2

Answer 15

When a fully depreciated asset is written off, I will debit acc depr (100%) and credit the
old asset at full cost (100%)

Answer 16

If an asset is fully and permanently impaired, I will debit acc depr (at that point of
time), debit loss, and credit asset at full cost

Answer 17

Cost depletion is used by GAAP and % completion is non-GAAP

Answer 18

Unit depletion rate = depletion base / estimated recoverable units

Answer 19

Total depletion = unit rate x # of units extracted for year

Answer 20

Within the depletion base, I must add any estimated restoration costs that will occur at
the end of the useful life and any costs used to buy the land where depletion will occur

Answer 21

If an asset was bought as used and already had been depreciated, there is a new
depreciable base calculated ONLY if the salvage value has changed from the previous
owners. The amt of the asset WILL always be the HISTORICAL COST (not the CV/price
that the new owners paid for it). This means I will do original cost - new salvage value

Answer 22

To find the CV of an asset, ALWAYS SUBTRACT THE ACC DEPR BY THE ORIGINAL
HISTORICAL COST, NOT THE DEPRECIABLE BASE