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2 cards from this section. Quick, good the night before a test.
What is depreciation?
Think about how equipment loses value as it ages or is used.
Define salvage value.
It's the amount you expect to receive when selling the asset after using it.
What does the Sum of the Years Digit Method allow a company to do?
Think about how the method distributes depreciation over time.
Depreciation can be understood as the reduction in value over what?
Consider what depreciation means regarding asset management.
You have a piece of equipment that cost $120,000. It's expected to have a useful life of 6 years with a salvage value of $15,000. How do you calculate yearly depreciation for each year using the SYD method? Show all calculations.
Make sure to factor in the salvage value and sum of years.
Why is it essential to understand the difference between accelerated and straight-line depreciation methods when handling equipment costs?
Consider how each method affects the annual accounting statements.
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