Accounting Question for you....?

Question

All of the following below are needed for the calculation of depreciation except:

a. Estimated Life
b. Residuale Value
c. Book Value
d. Cost


I am so stumped on this question. I reviewing Straight-line, Unit of production and Double Declining Depreciation methods. Please help

Answer 1

c. Book Value



Book value is what is left after the calculations for depreciation. All of the other choices are part of the calculation.



To calculate depreciation, you start with cost, then subtract residual value. You have to factor in estimated life in order to figure out how much of the total depreciation will be for any given accounting period, whichever method you use.

Answer 2

Depreciation is a systematic and rational allocation of the depreciable cost of a long lived asset over its useful economic life.



Depreciable Cost is the cost of purchase of the long lived asset less its estimated salvage value at the end of its useful life.



Accordingly, to calculate depreciation you need Cost, Residual Value and Estimated life. This leaves Book Value as the odd man out.



However, it may be mentioned that when calculating depreciation under diminishing or reducing balance method, you need the book value of the asset> You calculate depreciation: Book Value x Rate of depreciation.

Answer 3

As far as I know and if my memory don't fail me i would say the answer is c. Book Value



Estimated life is used in the equation of straight line and is only multiplied by 2 to get you double declining rate then unit of production use still different estimates like number of hours, units produced or estimated deposit for wasting assets.



Residual Value is the amount you can get at the end of the life or usage of an assets basically it is used by depreciation method except declining balance.



Residual value is computed by (Cost) - RV. BV is Cost of a brand new asset aquired at the begining of its life. but cost is something you paid for. so generally you will use cost - Rv to get the dpreciable amount and your depreciation. BV is what is left of the cost after dedecting your deprciation.



Hope this help but this is base on my knowledge

Answer 4

Dear Friend



If i review from Straight Line the formula is =



Cost of asset - Residual value / Estimated no. of years.



In this case Cost of asset is the historic cost (which includes the cost of asset plus the cost included to bring the assets in use).



Therefore item no. 'c' that is 'book value' is not required in the above formulae. Because the book value may be Written down value also. Where is cost is the actual one.



Please review the above and cross check with other friends also before any conclusion.



The above is only an opinion.



Regards

Srijit

Answer 5

c. Book Value