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: Straight Line

Financial Accounting

8. Long Lived Assets

Depreciation: Straight Line

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Multiple Choice

In the straight-line method of depreciation, depreciation is calculated based on the:

Current market value of the asset each year

Cost of the asset minus its estimated residual value, divided by its useful life

Total cash flows generated by the asset

Sum-of-the-years'-digits of the asset's useful life

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Verified step by step guidance

Understand the straight-line method of depreciation: This method allocates the cost of an asset evenly over its useful life. It is based on the assumption that the asset will provide equal benefits each year.

Identify the formula for straight-line depreciation: Depreciation Expense = (Cost of the Asset - Residual Value) / Useful Life.

Define the components of the formula: The 'Cost of the Asset' is the purchase price or acquisition cost. The 'Residual Value' (also called salvage value) is the estimated value of the asset at the end of its useful life. The 'Useful Life' is the expected period during which the asset will be productive.

Apply the formula: Subtract the Residual Value from the Cost of the Asset to determine the depreciable amount. Then divide this amount by the Useful Life to calculate the annual depreciation expense.

Ensure consistency: Use the same values for cost, residual value, and useful life throughout the calculation to maintain accuracy and consistency in financial reporting.