courses › Accounting

Spreading the cost of equipment over the years it's used.

In your head, jot if needed · no calculator why?

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skills · practice stats

From rounds of this course only: box, review and trial answers are left out. Once a skill has 40 tries, it compares your first 20 tries with your last 20.

• Straight-line per year par 17 s not tried yet

  worked example

  A packaging machine costs $34,500, is expected to last 5 years, and to be worth $3,000 at the end. What is straight-line depreciation per year?

  Answer: $6,300.00

  1. (Cost − salvage) ÷ life = ($34,500 − $3,000) ÷ 5 = $6,300 a year.

• Book value after some years par 20 s not tried yet

  worked example

  A packaging machine costs $68,000, has a salvage value of $8,000, and is depreciated straight-line over 8 years. What is its book value after 2 years?

  Answer: $53,000.00

  1. Each year takes ($68,000 − $8,000) ÷ 8 = $7,500.
  2. After 2 years: $68,000 − 2 × $7,500 = $53,000.

• Monthly depreciation par 16 s not tried yet

  worked example

  A $18,000 delivery e-bike with no salvage value is depreciated straight-line over 5 years. How much depreciation expense is recorded each month?

  Answer: $300.00

  1. $18,000 ÷ (5 years × 12 months) = $18,000 ÷ 60 = $300 a month.

• Double-declining balance par 20 s not tried yet

  worked example

  Equipment costs $32,000 with a 5-year life and no salvage value. Using double-declining balance (twice the straight-line rate, applied to the remaining book value), what is depreciation in year 2?

  Answer: $7,680.00

  1. Rate = 2 ÷ 5 = 40%.
  2. Year 1: $32,000 × 40% = $12,800.
  3. Year 2: ($32,000 − $12,800) × 40% = $7,680.

• Does depreciation use cash? par 12 s not tried yet

  worked example

  This year's depreciation expense on the packaging line is $11,500. By how much does it reduce the packaging line's book value this year?

  Answer: $11,500.00

  1. Depreciation spreads the cost of the packaging line over its useful life: it cuts profit and book value by $11,500 this year.
  2. Depreciation itself moves no cash; the cash moved whenever the packaging line was paid for.

rest ladder

Win 3 of your last 4 rounds and the course rests. A win is 90% right, within 2× the round's par. Pass the review when it comes back and the next rest is longer.

1. 1 day
2. 3 days
3. 7 days
4. 14 days
5. 30 days
6. 60 days
7. mastered · every 90 days

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