Question

Identify a type of company in your pathway that might purchase fixed assets

A company in my pathway that might purchase fixed assets is Bank of America.

List 5 fixed assets that they might purchase to run their business.

1. Furniture (filing cabinets, sofas, desks, chairs etc.)
2. ATM Machines
3. Computer Equipment (routers, servers.)
4. Computer Software (only the most expensive types)
5. Office Equipment (photocopiers, fax machines, postage meter etc.)

I answered the top two questions, but have to answer the others listed below.

Select one depreciable fixed asset. Based on research suggest what the cost, residual value and estimated life might be for that fixed asset.

Using your assumptions above, calculate:

Straight-line depreciation and book value for each of the first two years

Declining Balance depreciation and book value for each of the first two years

Units of Production depreciation (make assumptions about the first two year’s use), and book value for each of the first two years.

Suggest which depreciation method might be more appropriate and why.

Answer 1

SLM base Depreciation
Original cost $	25,000
Salvage Value $	5,000
Useful life Year	5
Depreciation Expenses	($25000-$5000)/5
Depreciation Expenses$	4,000
Period	Books Value $	Depreciation Expenses $	Accumulated depreciation$	Book Value End $
1	25,000	4,000	4,000	21,000
2	21,000	4,000	8,000	17,000

Double Decline base Depreciation
Original cost $	25,000
Salvage Value $	5,000
Useful life Year	5
Depreciation %	40%	( 2/N( number of Year)
Period	Books Value $	Depreciation Percent	Depreciation Expenses $	Accumulated depreciation$	Book Value End $
1	25,000	40%	10,000	10,000	15,000
2	15,000	40%	6,000	16,000	9,000

unit of Production base Depreciation
Original cost $	25,000
Salvage Value $	5,000
Useful life Year	5
Useful life that is expected to end after producing Unit	10,000
Depreciation Rate / unit
($25000-$5000)/10000 Unit	2
Number of Unit Produced in Year 1 Unit	2,000
Depreciation in Yr 1$	4,000
(2000 Unit *$2/ Unit)
Number of Unit Produced in Year 2 Unit	2,500
Depreciation in Yr 2 $
(2500 Unit *$2/ Unit)	5,000
Period	Books Value $	Depreciation Expenses $	Accumulated depreciation$	Book Value End $
1	25,000	4,000	4,000	21,000
2	21,000	5,000	9,000	16,000

The most commonly method for calculating depreciation under generally accepted accounting principle is the “Straight Line Method “

This method is simple and results few error , stays the most consistent and transition well from company prepared statement