Grade 11 accounting for Depreciation Review

What are the Adjusting Entries required for Depreciation?

1. Depreciation expense - (Asset 2. Accumulated Depreciation - (Contra-Asset)

What new contra-account is created for the measuring of depreciation?

Accumulated Depreciation - [Asset Acc Name]

What is a Contra-Asset?

An Asset account that has a normal credit balance instead of a debit balance.

Which method for depreciation is more accurate for a car, Declining Balance or Straight Line?

Declining Balance

What is the Straight Line Equation for Depreciation?

Depreciation = ( Cost - SalvageValue ) / Life in Number of periods

Declining Balance Example: What is the rate of depreciation for a car where the netbook value is $16000 with a depreciation rate at 50%?

Depreciation = NBV x Rate = 16000 x 0.50 Depreciation = 8000 8000 is the annual rate of depreciation for the car.

Declining Balance Example: What is the rate of depreciation for a motorcycle where the netbook value is $20000 with a depreciation rate of 37%?

Depreciation = NBV x Rate = 20000 x 0.37 Depreciation = 7400 7400 is the annual rate of depreciation for the motorcycle.

What is the Declining Balance Equation?

Depreciation(per year) = (Netbook Value - Residential Value) X Rate(in %)

What is the Netbook Value Equation?

NBV = Asset - Accumulated-Depreciation

Straight Line Example: Calculate the straight line rate if the cost of a car is $12000, the salvage value is $1500, and the useful life is 8 years.

SL = (Cost - Salvage value) / Useful Life = (12000 - 1500) / 8 SL = $1312.50

Straight Line Example 2: Calculate the straight line rate if the cost of a boat is $52000, the salvage value is $10000, and the useful life is 17 years.

SL = (Cost - Salvage value) / Useful Life = (52000 - 10000) / 17 SL = $2470.59

What are the two methods to calculate depreciation?

Straight Line, Declining Balance.