Depreciation!

Bonus

100

This term describes the reduction in value of intangible assets, similar to depreciation for tangible assets.

What is amortization?

200

This method of depreciation spreads the cost of an asset evenly over its useful life.

What is the straight-line method?

300

This method of depreciation involves applying a constant percentage to the asset's book value each year, resulting in decreasing expense amounts over time.

What is the declining balance method?

400

This is the bonus depreciation percentage for 2024?

What is 60%?

500

An asset is purchased for $50,000 with a salvage value of $5,000 and a useful life of 5 years. Using the double declining balance method, calculate the depreciation expense for the third year.

What is $7,200?

1. Double Declining Balance Rate: ( \text{Rate} = \frac{2}{\text{Useful Life}} = \frac{2}{5} = 40% )
2. Year 1 Depreciation: ( 50,000 \times 40% = 20,000 )
3. Book Value at End of Year 1: ( 50,000 - 20,000 = 30,000 )
4. Year 2 Depreciation: ( 30,000 \times 40% = 12,000 )
5. Book Value at End of Year 2: ( 30,000 - 12,000 = 18,000 )
6. Year 3 Depreciation: ( 18,000 \times 40% = 7,200 )

Accumulated

100

This term refers to the cumulative amount of depreciation that has been recorded against an asset since it was acquired.

What is accumulated depreciation?

200

This term describes the estimated period over which an asset is expected to be used before it is retired.

What is useful life?

300

This accounting concept requires that the method of depreciation chosen should reflect the pattern in which the asset's future economic benefits are expected to be consumed.

What is the matching principle?

400

This depreciation method considers the asset's usage or output rather than time.

What is the units of production method?

500

An asset has a cost of $20,000, a salvage value of $4,000, and a useful life of 5 years. If it produces 10,000 units and 3,000 units are produced in the first year, calculate the first-year depreciation using the units of production method.

What is $4,800? (Calculated as ((20,000 - 4,000) \times (3,000 / 10,000)))

Straight-Line

100

This is the form you enter depreciation and amortization information/amounts on.

What is form 4562

200

This term refers to the accounting entry used to record depreciation expense on the income statement.

What is depreciation expense?

300

This is the part and line number on the M-3 you enter your tax depreciation adjustment.

What is Part III, line 31?

400

This depreciation method calculates expense based on the sum of the years' digits of the asset's useful life, resulting in a more accelerated expense in the early years.

What is the sum-of-the-years'-digits method?

500

If an asset costs $10,000 and has a salvage value of $1,000 with a useful life of 5 years, calculate the annual depreciation using the straight-line method.

What is $1,800? (Calculated as ((10,000 - 1,000) / 5))

Double Declining

100

This form is where you enter sale of business property information/amounts.

What is form 4797?

200

This depreciation method allows businesses to write off more of an asset's cost in the early years, providing tax advantages.

What is accelerated depreciation?

300

This accelerated depreciation method allows more expense in the early years of an asset's life. 

What is the double declining balance method?

400

This method of depreciation, reported on Form 4562, allows for the immediate expensing of certain asset costs up to a specified limit.

What is the Section 179 deduction?

500

An asset costs $15,000 with a salvage value of $3,000 and a useful life of 4 years. Using the double declining balance method, what is the depreciation expense for the first year?

What is $7,500? (Calculated as (2 \times (15,000 / 4)))

Useful Life

100

This type of depreciation is used for tax purposes and can differ from book depreciation.

What is tax depreciation?

200

This concept refers to the expected value of an asset at the end of its useful life.

What is salvage value?

300

This accounting principle requires that depreciation be recorded as an expense in the period in which the asset is used.

What is the matching principle?

400

This concept involves reassessing the depreciation method, useful life, or residual value of an asset, requiring disclosure in financial statements if significant changes occur.

What is a revision of depreciation estimates?

500

Calculate the depreciation expense for the second year using the sum-of-the-years'-digits method for an asset costing $12,000 with a salvage value of $2,000 and a useful life of 3 years.

What is $4,000? (Calculated as ((12,000 - 2,000) \times (2/6)))