An asset was initially recognised at an amount of €100,000 with a residual value of €20,000 and a useful life of five years. In year 3 the residual is re-estimated to be €30,000. What is the appropriate depreciation charge for year 3?
- DaSaGwaLv 76 年前最佳解答
For this question, you use straight line depreciation:
End of 1st year:
(€100,000-20,000)/5 =€16,000 (depreciated amount)
residual value: €100,000 - 16,000 =€84,000
End of 2nd year:
residual value:€84,000-16,000 =€68,000
End of 3rd year:
(€68,000-30,000)/3 =€12,667 <== answer (the 3rd year depreciated value).
Because the residual value is re-estimated to be€30,000 at the 3rd year. Hence, you need to re-calculate the depreciation amount based upon the residual value (€68,000) for the end of the 2nd year.
2014-02-18 09:59:34 補充：
If after the re-estimation, the depreciation will spread over the next 5 years, then in the above calculation, where " /3 " (under "End of 3rd year") would be changed to " /5 ".
2014-02-18 11:31:49 補充：
master IJK! I do not quite understand your question. Do you mean the depreciation or residual value?
In accounting, whatever depreciation you have taken cannot be retroacted. You can only take residue value of the current year and go forward.
2014-02-18 11:32:29 補充：
However, you can change the re-estimated value and the useful life.
2014-02-18 11:33:51 補充：
I am not an accountant. I just have taken the accounting classes, and depreciation is what I need to use for my own application.
2014-02-18 11:49:15 補充：
I have the above supplement answer is because in the originally question, it did mention about the re-estimated value, but it didn't mention the NEW useful life. Hence, I assume the useful life stay the same.
2014-02-18 12:59:54 補充：
OK, I understand your point now!
My understanding in depreciation is:
You can fully depreciate or partial depreciate (with residual value). Let's focus on partial depreciation.
2014-02-18 13:02:14 補充：
When you use partial depreciation, there will always be "residual value" of the asset. Therefore, it doesn't matter whether you use "straight line depreciation" or "accelerated depreciation".
2014-02-18 13:06:11 補充：
Hence, my answer to #002 is NO. Reducing balance method still bases upon "residual value." Like I said in #007, as long as it is a partial depreciation, there will be residual value, no matter whether you use straight line or accelerated method.
2014-02-18 13:08:14 補充：
The reason company likes to use partial depreciation is because, towards the end of depreciation, the amount of depreciation is very little, especially for the accelerated method (straight line depreciation amount will stay the same for the course of depreciation).
2014-02-18 13:09:58 補充：
Therefore, it would be more practical to sell the asset for the residual value, then company can acquire new asset and go through the depreciation process again.
2014-02-18 13:12:44 補充：
After all, company will spend a fortune to buy the long-lived asset, but they CANNOT expense it ALL the year they make the purchase. They can only go through the depreciation to expense this expenditure over a certain period of time.
2014-02-18 13:19:18 補充：
Therefore, accelerated depreciation can help company to claim such an expenditure faster (to go against their income, so they will pay less tax), also, at the end of depreciation course, they can claim some of their expenditure as cash asset.
- Dark HelmetLv 76 年前
Really? You are not a CPA?
Of course not, you are obviously a grammarian.
- 知足常樂Lv 76 年前
I see, 大西瓜是會計師~
│ .✪‿✪ │
╰/) ⋈ (\╯
2014-02-18 10:52:31 補充：
是否有residual value一般都不用 reducing balance method?
2014-02-18 12:32:59 補充：
Straight-line method vs Double-declining method
2014-02-20 04:23:10 補充：
Thanks a lot for your effort!