1. Calculating Depreciation II
BAF3M
Calculating
Depreciation II

2. Homework check
Page 348 Exercise 1 (A,B,C)
Page 358 Exercise 4 (A,B)

3. Homework: Page 348 Exercise 1 (A,B,C)

4. Homework: Page 358 Exercise 4 (A,B)

5. The TWO main ideas on how to calculate depreciation:
Straight Line Depreciation
Declining Balance Depreciation

6. Straight Line Depreciation
original cost – residual value
years of life of the asset
(Straight line depreciation spreads the use of our asset evenly over the amount of time it is used.)

7. Let’s say we bought a car… does it lose its value evenly?
Declining Balance
Let’s say we bought a car… does it lose its value evenly?

8. With declining balance, we take off a certain percentage each year.
Year 1 Depreciation
= 30% * $100,000 car
= $30,000

9. Undepreciated Value of $70,000
Declining Balance
Year 2 Depreciation
Undepreciated Value of $70,000
x 30% = $21,000

10. Let’s look at a depreciation schedule…
Declining Balance
Let’s look at a depreciation schedule…
30% is taken off each year

11. Compare! (Straight Line vs. Declining Balance)

12. The TWO main ideas on how to calculate depreciation:
Straight Line Depreciation
Declining Balance Depreciation

13. Note:
Depreciation
With the exception of Land, all fixed assets
are expected to be ‘used up’ over a certain
period of time. These assets decrease
(or depreciate) in value.
Methods of Depreciation
Straight-Line depreciation divides
the price of an asset over
its useful life. (minus its
salvage or residual value)
Declining Balance method
decreases the value of an asset
by a pre-determined
percentage each fiscal period.

14. The following ‘Depreciation Schedules’ compare the two approaches.
Declining Balance

15. Homework
Page 348, Exercise 1 (D,E)
Exercise 2 (A,B)