F4 - Depreciable Assets and Depreciation. Flashcards
***What is the formula of Straight - Line depreciation method?
Cost less salvage value divide by estimate useful life = Depreciation.
***What is the definition of formula of SUm-of-the-year’-Digit?
One of the accelerated method of depreciation that provides higher depreciation expense in the early years and lower charges in the later years.
Depreciation expense =
Remaining life of asset divided by sum of the year digit x (cost - salvage).
For demoninator: n(n+1)/2.
What is the formula of accelerated depreciation method of “Double- declining balance” and formula?
Assets subject to rapid obsolescence. Each year’s depreciation rate is double the straight-line method.
Depreciation expense =
2 x 1/N x (cost - accumulated depreciation, NBV). Ignore SV.
Note: “Double- declining balance” method is the only method that ignores SV.
What is the mnemonic for calculating depletion on land?
It is REAL property:
Residual value (subtract)
Extraction/development cost
Anticipated restoration cost
Land purchase price
How to calculate unit depletion rate?
Unit depletion is the amount of depletion recognized per unit extracted.
Depletion base / estimated removable units.
How to calculate Depletion base?
Cost to purchase property
+ development costs for extrac
+ estimated restoration cost
- residual value of land after extracted.
How to calculate total depletion?
Unit depletion rate x number of units extracted.
Note: If all units extracted are not sold, then depletion must be allocated between COGS and inventory.
Depreciation methods : straight line, units of production, and accelerated method have different characteristic, what are they?
- straight line is based on the time.
- Unit of production is based on the use.
- Accelerated (sum of the year digit and declining balance) is based on rapid obsolescence.
Both Group and composite are using which depreciation method and what are the difference between those group and composite?
Both group and composite depreciation are based on the straight-line depreciation method.
The group is for similar assets but composite method is for collection of dissimilar assets.
Can accumulated depreciation equals original cost? Explain why or why not?
If accumulated depreciation equals original cost, then the asset has been depreciated to $0. Depreciable assets should not depreciated below salvage value under any depreciation method.
IFRS requires component depreciation, what is that mean?
Under component depreciation, the machinery, component, and inspection cost are recognized and depreciated separately
How to calculate carrying value(NBV)?
Cost minus accumulated depreciation.
What’s the double-declining balance depreciation expense?
Depreciation expense = 2 x 1/N x (cost - accumulated depreciation).
How to calculating the carrying amount?
Purchase price minus the accumulated depreciated expense.
What is the definition of depletion?
It is the cost allocation of wasting NATURAL RESOURCE such as oil, gas, and mineral to the production process.
