F3 M5 Flashcards
Physical depr is calculated from the useful life of an asset
Functional depr is calculated by the risk of obsolescence of an asset
Immaterial salvage values may be ignored
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
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
Depr base = cost - salvage val
SLN can be used to calculate straight-line in excel
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
Double-declining balance = DDB in excel (it will say the same thing as SYD)
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
Units-of-production depr = (cost - salvage val) / estimated # of units = rate p/unit
I will then multiply this # by the number of hours worked or units produced to get depr
exp p/year
Partial year depr can be chosen as well (half depr exp in 1st year and half in last year)
To find half year depr, take full year depr and divide by 2
When a fully depreciated asset is written off, I will debit acc depr (100%) and credit the
old asset at full cost (100%)
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
Cost depletion is used by GAAP and % completion is non-GAAP
Unit depletion rate = depletion base / estimated recoverable units
Total depletion = unit rate x # of units extracted for year
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
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
To find the CV of an asset, ALWAYS SUBTRACT THE ACC DEPR BY THE ORIGINAL
HISTORICAL COST, NOT THE DEPRECIABLE BASE
