6 1. Tangible, e.g can be seen or touched by individuals; services cannot be depreciated; and2. Continuing in service, e.g. has a depreciation schedule; one time used consumable cannot be depreciated.Depreciation Model 1-Straight line: Constant amount of depreciation each year or period over the depreciable life of the asset.d, (B-SV)/N, where N. depreciable life; B: cost basis; de depreciation in year/period k BV: book value at the end of k; and SV salvage value.ScenarioAcme purchased a coordinate measurement machine (CMM). The cost basis is $120,000 and it has a seven year depreciable life. Acme estimates a salvage valueof $22,000 at the end of seven years. Determine the annual depreciation amounts using SL depreciation.SolutionIn this scenario, the cost basis B-5This is your initial spending at the beginning of year 1, which will be reported as part of yourasset.Salvage value SV-$This is the end value of this equipment at the end of year seven, meaning you could sell the used machine andget the money back. This will be reported as your income, but the same dollar amount would be removed from your asset.As the depreciable year N-we can use the formula above and calculate dk-$amount through out the equipment's life span.This would be a fixedwhich is the differenceNow the book value at the end of year 1, BV, $between the cost basis and the depreciation.The book values for the remaining six years, your BV, BV1-d, meaning the book value should keep decreasing at the end of every year/period. Thecalculation will have to base on the previous year's book value instead of the cost basis at the beginning. As we demonstrated in class, you can calculate the BVin Excel and write their values below:• BV₂=5BV, S• BV S• BV, $• BV=Sthis value should be the same as SV• BV, S#

The book value of an asset refers to the sum value attained by declining the original value of an…

ation schedule; one time used consumable cannot be depreciated. Depreciation Model 1-Straight line: Constant amount of depreciation each year or period over the depreciable life of t d-(B-SV)/N, where N: depreciable life; B: cost basis; de depreciation in year/period k BV,: book value at the end of kc am Scenario Acme purchased a coordinate measurement machine (CMM). The cost basis is $120,000 and it has a seven year depreciable of $22,000 at the end of seven years. Determine the annual depreciation amounts using SL depreciation. Solution This is your initial spending at the beginning of year 1, which w In this scenario, the cost basis 8-5 asset. Salvage value SV-S This is the end value of this equipment at the end of year seven, meaning your get the money back. This will be reported as your income, but the

ation schedule; one time used consumable cannot be depreciated. Depreciation Model 1-Straight line: Constant amount of depreciation each year or period over the depreciable life of t d-(B-SV)/N, where N: depreciable life; B: cost basis; de depreciation in year/period k BV,: book value at the end of kc am Scenario Acme purchased a coordinate measurement machine (CMM). The cost basis is $120,000 and it has a seven year depreciable of $22,000 at the end of seven years. Determine the annual depreciation amounts using SL depreciation. Solution This is your initial spending at the beginning of year 1, which w In this scenario, the cost basis 8-5 asset. Salvage value SV-S This is the end value of this equipment at the end of year seven, meaning your get the money back. This will be reported as your income, but the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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