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Depreciation 4065 Depreciation Leanne Brown
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What is depreciation Spread the cost of an asset over its life. Used in income tax: assets that can be depreciated can not be deducted the year of its purchase.
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What can be depreciated Machinery Livestock Orchards Equipment Farm buildings Anything that can be used for more than one year.
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Can you list some items that can be depreciated?
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Why are the assets written off over a longer period? Because they provide a service for several years
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What causes a loss of value from an asset over time? Wear and tear do to use Out dated because of new technology Wear and tear from nature
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What can be depreciated Property that is subject to wear and tear during production Farming assets with a useful life over one year Assets must have a determined useful life. Land can not be depreciated
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Where do I start? There are three things to determine before you start Basis: cash paid or cash paid after trade in Service Date: when was it placed into service Method: method of depreciation used
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Cost are recovered over a … 3, 5, or 15 year period 3 year: cars, trucks, tools, breeding swine, some race horses 5 year: machinery and equipment, breeding livestock, single purpose structures, fences, heavy trucks 15 year: buildings and barns
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Two ways to calculate Depreciation Straight line Accelerated cost recovery system
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Straight line method In a 3 year plan you can have a recovery period of 3, 5, or 12 years In a 5 year: 5, 12, or 25 years In a 15 year: 15, 35, or 45 years
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Accelerated cost recovery system 3 year 25% 1 st year 38% 2 nd year 37% 3 rd year 5 year 15% 1 st year 22% 2 nd year 21% 3 rd year 21% 4 th year 21% 5 th year 15 year 5% 1 st year 10% 2 nd year 9% 3 rd year 8% 4 th year 7% 5 th year 7% 6 th year 6% 7 th through 15 th year
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