FAR 3.5 - Depreciation & Disposal Flashcards
The process of averaging the economic lives of a number of property units and depreciating the entire class of assets over a single life:
Composite depreciation
If the average service life of the group of assets has not been real ahead when an asset is retired, the gain or loss is absorbed in what account?
Accumulated depreciation
This depreciation method provides for higher depreciation expense in the early years and lower charges in the later years:
Sum of the years digit depreciation
What Is the formula to calculate the denominator of the sum of years digits method of depreciation?
N (N + 1) / 2
What is the formula for the sum of years digits depreciation calculation?
(Cost - salvage value) X (Remaining life of asset / sum of years digits)
What is the formula to calculate the depreciation expense using the units of production method of depreciation?
(Cost - salvage value) / estimated units = rate per unit
Rate per unit X number of unit produced = depreciation expense
What is the formula used to calculate the depreciation expense using the double declining balance depreciation method?
2 X (1/N) X (cost - accumulated depreciation)
The half year convention means:
Half the years depreciation is taken in both the year of acquisition and the year of disposal
No salvage value is taken into consideration in which depreciation method?
The double declining balance method
What are the two methods used to calculate depletion? And which is GAAP?
- Cost depletion (GAAP)
- Percentage depletion
What is the formula to calculate depletion?
(Cost - salvage value) / estimated recoverable units = unit depletion rate
Unit depletion rate X number of units extracted = total depletion
Formula to calculate the amount of depletion to be included in cost of goods sold:
Unit depletion rate X number of units sold
