1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-2 Calculating Depreciation Expense

2. CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 18-2 Estimated Salvage Value Original Cost Estimated Total Depreciation Expense =– $3,000.00 Annual Depreciation Expense = Years of Estimated Useful Life ÷ Estimated Total Depreciation Expense $600.00 $250.00 $3,250.00 STRAIGHT-LINE DEPRECIATION Calculating Annual Depreciation Expense 1 page 538 =– = 5 ÷ $3,000.00 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. 2

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 18-2 Months in a Year Annual Depreciation Expense Monthly Depreciation Expense =÷ $50.00 Partial Year’s Depreciation Expense = Number of Months Asset Is Used × Monthly Depreciation Expense $250.00 12 $600.00 CALCULATING DEPRECIATION EXPENSE FOR PART OF A YEAR Calculating Partial Year’s Depreciation Expense 1 page 539 =÷ = 5 × $50.00 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. 2

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 18-2 CALCULATING ACCUMULATED DEPRECIATION page 540 20X3 Depreciation Expense 20X2 Accumulated Depreciation 20X3 Accumulated Depreciation =+ $1,800.00$600.00 $1,200.00 =+

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 18-2 CALCULATING BOOK VALUE page 540 Accumulated Depreciation Original Cost Ending Book Value =– $1,450.00$1,800.00 $3,250.00 =– Annual Depreciation Beginning Book Value Ending Book Value =– $1,450.00$600.00 $2,050.00 =–