Summary Finance chapter 9

Chapter 9 – plant and intangible
assets
Depreciation
Straight-line method
(Cost – residual value) : Years of useful life
Cost $17,000
Estimated residual value $2,000
Estimated useful life 5 years
($17,000-$2,000) : 5 = $3,000 per year

Year Compuation Depreciation Accumulated Book Value
expense depreciation
1 ($17,000- $3,000 $3,000 $14,000 =
$2,000) : 5 $17,000-$3,000
2 ($17,000- $3,000 $6,000 $11,000
$2,000) : 5
3 ($17,000- $3,000 $9,000 $8,000
$2,000) : 5
4 ($17,000- $3,000 $12,000 $5,000
$2,000) : 5
5 ($17,000- $3,000 $15,000 $2,000 =
$2,000) : 5 residual value

Straight-line method with half year convention
Year Computation Depreciation Accumulated Book value
expense depreciation
1 ($17,000- $1,500 $1,500 $15,500
$2,000) : 5 : 2
2 ($17,000- $3,000 $4,500 $12,500
$2,000) : 5
3 $17,000- $3,000 $7,500 $9,500
$2,000) : 5
4 $17,000- $3,000 $10,500 $6,500
$2,000) : 5
5 $17,000- $3,000 $13,500 $3,500
$2,000) : 5
6 ($17,000- $1,500 $15,000 $2,000
$2,000) : 5 : 2

200% depreciation method
Year Computation Depreciation Accumulated Book value
expense depreciation