Chapter 18

Depreciation:
Assignments

Prepared by Charlie Cook

The University of West Alabama

2009 South-Western, a part of Cengage Learning

Chapter Terms for Review

accumulated depreciation
basic depreciation rate
book value
declining-balance (DB) method
declining-balance depreciation rate
depreciation
double-declining-balance
estimated service life
Modified Accelerated Cost Recovery System (MACRS)
obsolescence
150%-declining-balance
original cost
scrap value (SV)
straight-line (SL) method
sum-of-the-years-digits (SYD) method
units-of-production method
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TERMS

Depreciationthe decrease in the value of

physical assets of business caused by wear or by
obsolescence.
Book value of an assetthe original cost minus
the accumulated depreciation, or the total of all
depreciation to that time.
Methods of Depreciation
Straight-line (SL) method
Units-of-production method
Declining balance (DB) method

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EXAMPLE

Computing Depreciation with

the Straight-Line Method

Factors
Original cost
Estimated service life
Estimated scrap value

Formula:
(Original cost Scrap value) Estimated service life in periods
of time = Depreciation amount for one unit or period

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EXAMPLE

Computing Depreciation with

the Units-of-Production Method

Formula:
(Original cost Scrap value) Estimated life in
service units = Depreciation amount for one unit

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to Compute Depreciation, Using the DB Method

1. Divide 100% by the estimated years of useful life

to determine the basic depreciation rate.

2. Multiply the basic depreciation rate by 2 (doubledeclining-balance) or by 1.5 (150%-decliningbalance) to determine the declining-balance
depreciation rate.
3. Multiply the declining-balance depreciation rate
by the book value of the asset at the beginning of
the year to determine the depreciation amount for
that year. (For the first year, the book value at the
beginning of the year equals the asset cost. Do
not subtract the scrap value.)
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EXAMPLE

*As book value ($972) is larger than estimated scrap value ($900), there is some depreciation in the sixth year. However, the calculated depreciation
($388.80) is greater than book value minus scrap value ($972 2 $900 5 $72). Thus, depreciation is limited to the smaller amount, $72.

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to Compute Depreciation Using the SYD method

1. Compute the sum of all the years digits in the estimated life
of the asset. Use this shortcut formula:
((n + 1) n) 2 , where n = number of years in estimated life.
2. Determine the current years depreciation fraction by using
this formula: Estimated years of life remaining at the
beginning of the current year Sum of all digits from Step 1.
3. Multiply the total depreciation amount (Cost SV) of the
asset by the depreciation fraction from Step 2 to determine
depreciation for the current year.
Note that each year a new depreciation fraction from Step 2
is determined and Step 3 is repeated. The sum of all digits in
Step 1 and the total depreciation amount in Step 3 are the
same every year.
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EXAMPLE

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Figure 18.1

Modified Accelerated Cost Recovery System

(MACRS) Depreciation Schedule

Note: The MACRS percentage for the first

year is applicable to a partial or full year.
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EXAMPLE

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EXAMPLE

Computing Partial-Year Depreciation

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EXAMPLE

Computing Partial-Year Depreciation (contd)

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Foto

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

A

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

B

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.1: Business Depreciation

B

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.1: Business Depreciation

B

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.1: Business Depreciation

B

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.1: Business Depreciation

B

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Assignment 18.1: Business Depreciation

C

Solve the following depreciation problems.

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Foto

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

2009 South-Western, a part of Cengage Learning

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.2: Business Depreciation

A

Solve the following depreciation problems. Round dollar amounts to two decimal places.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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Assignment 18.2: Business Depreciation

B

Solve the following depreciation problems.

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