© 2014 Cengage Learning. All Rights Reserved. Learning Objectives LO4 Calculate depreciation expense. LO5 Calculate depreciation for a partial year. LO6 Calculate accumulated depreciation and book value. © 2014 Cengage Learning. All Rights Reserved.

Calculating Straight-Line Depreciation Lesson 19-2 Calculating Straight-Line Depreciation LO4 Original Cost − Estimated Salvage Value = Estimated Total Depreciation Expense $8,500.00 − $500.00 = $8,000.00 Estimated Total Depreciation Expense ÷ Years of Estimated Useful Life = Annual Depreciation Expense $8,000.00 ÷ 4 = $2,000.00

Calculating Depreciation Expense for Part of a Year Lesson 19-2 Calculating Depreciation Expense for Part of a Year LO5 Annual Depreciation Expense ÷ Months in Year = Monthly Depreciation Expense $900.00 ÷ 12 = $75.00 Monthly Depreciation Expense × Number of Months Asset Is Used = Prior Year’s Depreciation Expense $75.00 × 4 = $300.00

Calculating Accumulated Depreciation Lesson 19-2 Calculating Accumulated Depreciation LO6 20X2 Accumulated Depreciation + 20X3 Depreciation Expense = 20X3 Accumulated Depreciation $1,200.00 + $900.00 = $2,100.00

Calculating Book Value Lesson 19-2 Calculating Book Value LO6 Original Cost − Accumulated Depreciation = Ending Book Value $3,000.00 − $2,700.00 = $300.00

Lesson 19-2 Audit Your Understanding 1. Which accounting concept is being applied when depreciation expense is recorded for plant assets? ANSWER Matching Expenses with Revenue

Lesson 19-2 Audit Your Understanding 2. What three amounts are used to calculate a plant asset’s annual depreciation expense using the straight-line method of depreciation? ANSWER Original cost, estimated salvage value, and estimated useful life