6.2 - Depreciation

Question 1

depreciation

Answer 1

It is the distribution of the cost of an asset as an expense over the years in which the business uses that asset.

Question 2

Depreciation must be

Answer 2

estimated since only at the end will a business know how many years an asset was actually used

Question 3

two methods to determine depreciation

Answer 3

Straight-Line Method
Declining Balance Method

Question 4

Straight-Line Method

Answer 4

divides up the net cost of the asset equally over the years of the asset’s life

formula: Original Cost minus Salvage Value over Number of useful years

Question 5

Adjusting Entry for Dep.

Answer 5

two new accounts

Depreciation Expense - represents the amount of depreciation for a fiscal period

Accumulated Depreciation - represents the total amount of depreciation

Question 6

Accumulated depreciation is what kind of account

Answer 6

a contra account for the particular asset it is related to

Question 7

Declining Balance Method

Answer 7

calculates the annual depreciation by multiplying the remaining un-depreciated amount by a fixed percentage

Declining Balance Depreciation for the year = Carrying Amount multiplied by %

Carrying Amount = Cost - Accumulated Depreciation