Straight Line Depreciation Model 9.04 Problem Straight Line Depreciation Truck Acquisition Cost $13,000 Salvage Value $1,000 (do not depreciate below SV Useful life 5 years or 100,000 miles Placed in Service 1/1/4r1 Depreciable Cost Capitalized Cost - Salvage Value MODELA Placed in Service / yr 1: Capitalized Cost (Book Value): SIL Depreciable Depr Depr Accum. Remaining START 13.000 year cost basis rate expense depr book value 1 12,000 20% 2,400 2,400 10.600 2 12,000 20% 2,400 4,800 8.2001 3 12.000 20% 2,400 7,200 5,800 4 12.000 20% 2.4001 9.600 3,400 5 12,000 20% 2,400 12.000 1.000 =SY MODELBI Placed in Service 411 Mr 1 other than 1/1Yr.t requires proration). Capitalized Cost Book Value): SA Deorectable Deor Depr Accum. Remaining START 13.000 year cost basis rate expense depr book value 1 12.000 15% 1,800 1.800 11.200 2 12,000 20% 2.400 4,200 8.800 3 12.000 20% 2.400 6,600 6,400 4 12,000 20% 2.400 9,000 4,000 5 12.000 20% 2,400 11 400 1,600 12,000 5%(2) 600 12,000 1.000 =SV ON- (0120% x 9/12 = 15% (2120% X 3/12 - 5% (9 months in first year) | 3 months in year six to complete 12 months). 4,03 Calculate capitalized cost for basis of depreciation for Items below: Truck purchased, upgraded and placed in service Sep 10: Date Description Amount Include Sep 1 Purchase of Truck 20,000 Sep 1 Freight 500 Sep 1 Sales Tax 1500 Sep 1 License Plates 360 Sep 1 Liability Insurance 900 Sep 1 Collision Insurance 300 Sep 5 Hydraulic Lift 5000 Dec 1 Special Paint 1000 Total Capitalized Cost: Building purchased June 1, upgraded and placed in service August 1: Date Description Amount Include June 1 Purchase of Building 600,000 June 1 Land 200,000 June 1 Vandalism 12,000 June 1 Title fees 1,500 June 1 Real Property Taxes (County) 6,000 June 15 Pave parking lot 40,000 July 1 Outdoor lighting 30,000 Nov 10 Fences 20,000 Total Capitalized Cost: Main Frame computer purchased Jan 1, placed in service Feb 1: Date Description Amount Include Jan 2 Raised flooring 40,000 Jan 2 Air Conditioning 25.000 Jan 6 Purchase of computer 700.000 Jan 6 Freight 7.000 Jan 7 Installation(1 week) 30 000 Jan 7 Mistakes during installation 10,000 Jan 15 Testing (2 weeks) 35,000 Aug 1 Memory upgrade 40,000 Total Capitalized Cost: Some Rules: Do not capitalize recurrent items, items adding value that occur after 90-days from the placed-in service date, land, vandalism, mistakes in installation, uninsured theft, damage during unpacking and installing, fines for not obtaining proper permits from governmental agencies. Depreciate from the "placed-in-service" date (not from the purchase date), also do not depreciate below salvage value or beyond the useful life of the asset. To get annual depreciation rate: (100% divided by # years of useful life)-First year may need adjusting further in accordance with # of months in-service in the first year /12 months. Same for last year of service: #months in-service / 12 months. Straight Line Depreciation Model 9.04 Problem Straight Line Depreciation Truck Acquisition Cost $13,000 Salvage Value $1,000 (do not depreciate below SV Useful life 5 years or 100,000 miles Placed in Service 1/1/4r1 Depreciable Cost Capitalized Cost - Salvage Value MODELA Placed in Service / yr 1: Capitalized Cost (Book Value): SIL Depreciable Depr Depr Accum. Remaining START 13.000 year cost basis rate expense depr book value 1 12,000 20% 2,400 2,400 10.600 2 12,000 20% 2,400 4,800 8.2001 3 12.000 20% 2,400 7,200 5,800 4 12.000 20% 2.4001 9.600 3,400 5 12,000 20% 2,400 12.000 1.000 =SY MODELBI Placed in Service 411 Mr 1 other than 1/1Yr.t requires proration). Capitalized Cost Book Value): SA Deorectable Deor Depr Accum. Remaining START 13.000 year cost basis rate expense depr book value 1 12.000 15% 1,800 1.800 11.200 2 12,000 20% 2.400 4,200 8.800 3 12.000 20% 2.400 6,600 6,400 4 12,000 20% 2.400 9,000 4,000 5 12.000 20% 2,400 11 400 1,600 12,000 5%(2) 600 12,000 1.000 =SV ON- (0120% x 9/12 = 15% (2120% X 3/12 - 5% (9 months in first year) | 3 months in year six to complete 12 months). 4,03 Calculate capitalized cost for basis of depreciation for Items below: Truck purchased, upgraded and placed in service Sep 10: Date Description Amount Include Sep 1 Purchase of Truck 20,000 Sep 1 Freight 500 Sep 1 Sales Tax 1500 Sep 1 License Plates 360 Sep 1 Liability Insurance 900 Sep 1 Collision Insurance 300 Sep 5 Hydraulic Lift 5000 Dec 1 Special Paint 1000 Total Capitalized Cost: Building purchased June 1, upgraded and placed in service August 1: Date Description Amount Include June 1 Purchase of Building 600,000 June 1 Land 200,000 June 1 Vandalism 12,000 June 1 Title fees 1,500 June 1 Real Property Taxes (County) 6,000 June 15 Pave parking lot 40,000 July 1 Outdoor lighting 30,000 Nov 10 Fences 20,000 Total Capitalized Cost: Main Frame computer purchased Jan 1, placed in service Feb 1: Date Description Amount Include Jan 2 Raised flooring 40,000 Jan 2 Air Conditioning 25.000 Jan 6 Purchase of computer 700.000 Jan 6 Freight 7.000 Jan 7 Installation(1 week) 30 000 Jan 7 Mistakes during installation 10,000 Jan 15 Testing (2 weeks) 35,000 Aug 1 Memory upgrade 40,000 Total Capitalized Cost: Some Rules: Do not capitalize recurrent items, items adding value that occur after 90-days from the placed-in service date, land, vandalism, mistakes in installation, uninsured theft, damage during unpacking and installing, fines for not obtaining proper permits from governmental agencies. Depreciate from the "placed-in-service" date (not from the purchase date), also do not depreciate below salvage value or beyond the useful life of the asset. To get annual depreciation rate: (100% divided by # years of useful life)-First year may need adjusting further in accordance with # of months in-service in the first year /12 months. Same for last year of service: #months in-service / 12 months