CENTURY 21 ACCOUNTING © Thomson/South-Western

LESSON 18-2LESSON 18-2

Calculating Depreciation Expense

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 18-2

EstimatedSalvage Value

OriginalCost

Estimated TotalDepreciation

Expense

=–

$3,000.00

AnnualDepreciation

Expense

=Years of EstimatedUseful Life

÷Estimated Total

Depreciation Expense

$600.00

$250.00$3,250.00

STRAIGHT-LINE DEPRECIATIONSTRAIGHT-LINE DEPRECIATION

Calculating Annual Depreciation Expense

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page 538

=–

=5÷$3,000.00

1. Subtract the asset’s estimated salvage value from the original cost.

2. Divide the estimated total depreciation expense by the years of estimated useful life.

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CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 18-2

Months ina Year

AnnualDepreciation

Expense

MonthlyDepreciation

Expense

=÷

$50.00

Partial Year’sDepreciation

Expense

=Number of MonthsAsset Is Used

×Monthly

Depreciation Expense

$250.00

12$600.00

CALCULATING DEPRECIATION EXPENSE CALCULATING DEPRECIATION EXPENSE FOR PART OF A YEARFOR PART OF A YEAR

Calculating Partial Year’s Depreciation Expense

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page 539

=÷

=5×$50.00

1. Divide the annual depreciation expense by 12.

2. Multiply the monthly depreciation expense by the number of months the plant asset is used in a year.

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CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 18-2

CALCULATING ACCUMULATED CALCULATING ACCUMULATED DEPRECIATIONDEPRECIATION page 540

20X3 Depreciation

Expense

20X2 AccumulatedDepreciation

20X3 AccumulatedDepreciation

=+

$1,800.00$600.00$1,200.00 =+

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 18-2

CALCULATING BOOK VALUECALCULATING BOOK VALUE page 540

AccumulatedDepreciation

OriginalCost

Ending Book Value

=–

$1,450.00$1,800.00$3,250.00 =–

AnnualDepreciation

BeginningBook Value

Ending Book Value

=–

$1,450.00$600.00$2,050.00 =–