NonAccelerated Depreciation Methods

Question 1

Define “Book Value”

Answer 1

Original Cost less A/D to date

Question 2

What type of allocation is depreciation considered?

Answer 2

Systematic and rational allocation of capitalized asset cost to time periods

Question 3

List the non-accelerated methods of depreciation

Answer 3

1. ) Straight Line
2. ) Service Hours Method
3. ) Units of output method

Question 4

How do we calculate the annual straight-line depreciation amount of an asset?

Answer 4

(Cost-salvage value)/Useful Life

Question 5

Depreciation is included in overhead and allocated to production based on machine hours or direct labors for what type of asset?

Answer 5

Manufacturing assets

Question 6

How is depreciation based on service hours calculated?

Answer 6

• Depreciation rate x service hours used

- Depreciation rate = (Cost-salvage value)/estimated hours

Question 7

What is the justification of the Straight line method of depreciation?

Answer 7

The asset will provide essentially the same benefits per year.

Question 8

What is the justification of the Service hours method of depreciation?

Answer 8

Asset will provide essentially the same benefits per service hour. A delivery vehicle is an example

Question 9

What is the justification of the Unit of Output method of depreciation?

Answer 9

The asset will provide essentially the same benefit per service hour. oil drilling equipment is an example.

Question 10

How is depreciation on the Units of Output Method calculated?

Answer 10

Depreciation Rate = (Cost-Salvage Value)/(Useful life in units of production)
-Depreciation rate x units of production

Question 11

What 4 factors affect the amount of depreciation recognized in each period?

Answer 11

1. ) Capitalized cost - only definite amount among factors
2. ) Estimated useful life
3. ) Estimated Salvage value
4. ) Method Chosen