Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Depreciation: Summary of Main Methods

Financial Accounting

8. Long Lived Assets

Depreciation: Summary of Main Methods

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Multiple Choice

The depreciable cost of an asset is the asset's cost minus its estimated:

market value

salvage value

accumulated depreciation

book value

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Verified step by step guidance

Understand the concept of depreciable cost: Depreciable cost refers to the portion of an asset's cost that is allocated over its useful life for depreciation purposes. It is calculated by subtracting the estimated salvage value from the asset's total cost.

Define salvage value: Salvage value is the estimated residual value of an asset at the end of its useful life. It represents the amount the company expects to recover when the asset is sold or disposed of.

Clarify the formula for depreciable cost: The formula is:

Depreciable Cost = Asset' s Cost - Salvage Value

. This formula ensures that depreciation is calculated only on the portion of the asset's cost that will be consumed during its useful life.

Differentiate between other terms: Accumulated depreciation refers to the total depreciation expense recorded for an asset over time, while book value is the asset's cost minus accumulated depreciation. Neither of these terms is used in the calculation of depreciable cost.

Apply the concept: To calculate the depreciable cost of an asset, subtract the estimated salvage value from the asset's original cost. This value will then be used to allocate depreciation over the asset's useful life using methods such as straight-line or declining balance.