LESSON 18-2 Calculating Depreciation Expense 5/28/2018 LESSON 18-2 Calculating Depreciation Expense

STRAIGHT-LINE DEPRECIATION page 538 Calculating Annual Depreciation Expense 1. Subtract the asset’s estimated salvage value from the original cost. 2. Divide the estimated total depreciation expense by the years of estimated useful life. Estimated Salvage Value Original Cost Estimated Total Depreciation Expense = – $3,250.00 – $250.00 = $3,000.00 1 Annual Depreciation Expense = Years of Estimated Useful Life ÷ Estimated Total Depreciation Expense $3,000.00 ÷ 5 = $600.00 2 LESSON 18-2

CALCULATING DEPRECIATION EXPENSE FOR PART OF A YEAR page 539 Calculating Partial Year’s Depreciation Expense 1. Divide the annual depreciation expense by 12. 2. Multiply the monthly depreciation expense by the number of months the plant asset is used in a year. Months in a Year Annual Depreciation Expense Monthly Depreciation Expense = ÷ $600.00 ÷ 12 = $50.00 1 Partial Year’s Depreciation Expense = Number of Months Asset Is Used × Monthly Depreciation Expense $50.00 × 5 = $250.00 2 LESSON 18-2

CALCULATING ACCUMULATED DEPRECIATION page 540 20X3 Depreciation Expense 20X2 Accumulated Depreciation 20X3 Accumulated Depreciation = + $1,200.00 + $600.00 = $1,800.00 LESSON 18-2

CALCULATING BOOK VALUE page 540 Accumulated Depreciation Original Cost Ending Book Value = – $3,250.00 – $1,800.00 = $1,450.00 Annual Depreciation Beginning Book Value Ending Book Value = – $2,050.00 – $600.00 = $1,450.00 LESSON 18-2