1. LESSON 14-5 Planning and Recording Depreciation Adjustments
4/20/2017
LESSON 14-5
Planning and Recording Depreciation Adjustments

2. CALCULATING DEPRECIATION EXPENSE AND BOOK VALUE
page 424
(continued on next slide)
Book Value The original cost minus the depreciation to-date.
Estimated Salvage Value The expected amount to receive from the
sale or disposal of an asset at the end
of its useful life.
Depreciation The amount an asset is no longer worth as it ages.
Straight-Line Method of Depreciation A method used to calculate
the depreciation of an asset.
LESSON 14-5

3. CALCULATING STRAIGHT-LINE DEPRECIATION3
CALCULATING STRAIGHT-LINE DEPRECIATION
page 424
Straight-Line Depreciation Calculation
Original Cost minus Salvage value divided by years of useful life equals Depreciation per year of useful life;
Purchased Computer Desk for $ Estimated salvage value is $250. The useful life of the desk is 5 years. Annual Depreciation Expense is $200 per year.
Years of Useful Life /
Salvage Value –
Original Cost
Annual Depreciation =
$1,250.00 –
$250.00 / 5 =
$200.00
LESSON 14-5

4. CALCULATING DEPRECIATION EXPENSE4
CALCULATING DEPRECIATION EXPENSE
page 424
Purchased Computer Desk for $ Annual Depreciation Expense is $200 per year.
Office Equipment
Record the depreciation expense for the year for the computer $200 for the year.
Dec 31 Bal $1250
Contra Acct
Accum. Depr. Office Equipment
Depr. Expense Office Equipment
Dec 31 Bal $400
$200
$200
New balance
$600
LESSON 14-5

5. ANALYZING AND RECORDING ADJUSTMENTS FOR DEPRECIATION EXPENSE
page 425
1. Write the debit amounts.
2. Write the credit amounts.
3. Label the adjustments.
LESSON 14-5

6. CALCULATING BOOK VALUE
page 424
Book Value Calculation
Original Cost minus total accumulated depreciation to-date equals Book Value
Ending Book Value =
Total Accumulated Depreciation –
Original Cost
$1,250.00 –
$600.00 =
$650.00
Stop here….Federal Income Tax
LESSON 14-5

7. Calculating Federal Income Tax and Completing a Work Sheet
LESSON 14-6
4/20/2017
LESSON 14-6
Calculating Federal Income Tax and Completing a Work Sheet 7

8. FEDERAL INCOME TAX EXPENSE ADJUSTMENT8
FEDERAL INCOME TAX EXPENSE ADJUSTMENT
page 427
Total of Income Statement Credit column $ 500,253.10
Less total of Income Statement Debit column before federal income tax –396,049.91
Equals Net Income before Federal Income Tax $ 104,203.19
You must determine the Net Profit (Net Income before Federal Tax) in order to calculate the Federal Income Tax.
Calculate Net Profit on a piece of paper.
LESSON 14-6

9. CALCULATING FEDERAL INCOME TAX9
CALCULATING FEDERAL INCOME TAX
page 428
Total Net Income:
$104,203.19
Tax Due: $23,889.24
Already paid: $18,000
Now Due: $
LESSON 14-6

10. RECORDING THE FEDERAL INCOME TAX ADJUSTMENT10
RECORDING THE FEDERAL INCOME TAX ADJUSTMENT
page 429
Add adjusting entries for Federal Income Tax Payable/Expense
Total and rule the Adjustments columns
Extend totals to Income Statement and Balance Sheet
LESSON 14-6

11. COMPLETING A WORK SHEET11
COMPLETING A WORK SHEET
page 430
Compute the Net Income after Federal Income Tax
Total, prove, and rule the Worksheet
LESSON 14-6

12. A COMPLETED 8-COLUMN WORK SHEET12
A COMPLETED 8-COLUMN WORK SHEET
page 432
LESSON 14-6