Depreciation and Useful Life

Buildings, machinery, equipment, furniture, fixtures, computers, outdoor lighting, parking lots, cars, and trucks are examples of pluss that result locomote for more than one year, but will not last indefinitely. Over time, these assets depreciate. derogation is defined as a non-cash set down that reduces the harbor of an asset as a result of physical or structural factors over time. Therefore, the costs of the fixed assets should be recorded as an outgo over their effective lives, since they depreciate and must be replaced once the destroy of their useful life is reached.Physical disparagement factors include wear and economic rent during use or from being exposed to such things as weather. operable depreciation factors include obsolescence or changes in customer needs that stool the asset to no longer provide portions for which it was intended or needed. When it comes to computing depreciation, there are three factors that determine the depreciation expense for a fi xed asset the assets initial cost, anticipate useful life, and estimated residual note apprise. And there are also three various ways to calculate depreciation the straight line rule, the units-of-production method, and the double-declining-balance method.The straight-line method of depreciation provides the same bar of depreciation expense for each year of the assets useful life, and is known to be the most commonly use method of calculating depreciation. The units-of-production method of depreciation provides the same amount of depreciation expense for each unit of production. Based on what the asset is, the units-of-production method can be expressed in toll of quantity produced, miles, hours, etc. and is often used when the fixed assets in service time or use varies from year to year.The double-declining-balance method of depreciation provides for a declining periodic expense over the expected useful life of the asset. The double-declining-balance method shows a higher d epreciation in the first year of the assets use, followed by declining depreciation amounts in the years following, which is why this method is also referred to as an accelerated depreciation method. There are several(prenominal) different types of assets that depreciate over time. dispraise refers to fixed assets, which exist physically, and so making them tangible assets.In some cases, there are assets that do not depreciate. An example of an asset that does not depreciate would be earth since it has an unlimited useful life. If land has a limited useful life, as is the case with a quarry, then it is acceptable to depreciate it over its useful life. One example of an asset that would depreciate would be a MacBook professional person laptop. This is an asset that I would use the straight-line method for being that while computers and technology are constantly changing devices such as MacBook professionals seem to consistently hold their value.Lets say you purchased the MacBook Pro for $2800 with an expected useful life of 5 years and an estimated residual value of $700, according to the straight-line method of depreciation, it would be calculated as Annual Depreciation = Cost Residual assess = $2800-$700 = $420. 00 Useful life 5 some other example of an asset that would depreciate over time would be a vehicle. This is an asset that I would use the units-of-production method for being that the usage and fuel consumption rate may vary from year to year.Lets say you purchased the vehicle for $59,900 that is expected to have a useful life of 95,000 miles and an estimated residual value of $19,560, and during the year the vehicle was operated 21,000 miles. According to the units-of-production method of depreciation, it would be calculated as Step 1 Depreciation per Unit = Cost Residual Value = $59,900 -$19,560 = $0. 42 per mile Total Units of Production 95,000 miles Step2 Depreciation cost=Depreciation per unit X Total Units of Production Used Depreciati on Expense = $0. 42 X 21,000 Miles = $8,820