Unit 2 AOS 3 Depreciation

Depreciation is an _______?

Depreciation is the process of allocating the ​ cost of a ​ (a)   over its useful life.

• Non-current Asset
• Current Asset
• Intangible Asset

A non-current asset is a present economic resource

controlled by the entity as a result of past events and is

expected to be used by the business for a number of years (>

12 months) and is not held for the purpose of ______?

Refer to Accounting assumption, why are we reporting for the depreciation expense?

• Period assumption

• Accounting entity assumption

• Accrual Accounting assumption

• Going concern assumption

​ (a)   , which ensures that its cost can be evidenced by a source document and that an independent observer would come to the same conclusion regarding its cost. Therefore, the cost of the non-current asset would be a ​ (b)   , free from error and without bias.

• Verifiability
• revelvance
• Faithful representation
• timeliness
• understandability

Why report depreciation expense for each reporting period?

Because Depreciation spreads out or allocates the cost of the asset over the years in which it is useful for earning revenue, rather than treating all of the cost as an expense in any one year. This is due to ____ __assumption: the assumption that reports are prepared for a particular period of time, such as a month or a year, in order to obtain comparability of the results.

0. On 1 July 2024, Restoration Doors purchased a new Fiju photocopier C506X for $6 000 (plus $600 GST). It is expected that the photocopier will have a Useful life of 4 years and will be disposed of at this time for $300. Identify historical cost and residual value.

• HC=$6600

  RV=$300

• HC=$6600

  RV=$300

• HC=$6000

  RV=$1245

• HC=$6600

  RV=1245

0. On 1 July 2024, Restoration Doors purchased a new Fiju photocopier C506X for $6 000 (plus $600 GST). It is expected that the photocopier will have a Useful life of four years and will be disposed of at this time for $300. The depreciation rate is __.__%

Identify tangible asset and intangible asset.

Groups:

(a) Tangible Asset

,

(b) Intangible asset

• trade marks

• goodwill

• factory machine

• vehicles

• Computer

• copyrights

• sofa

• shop fittings

• patents

1. Explain why Residual value is deducted from the Historical cost when calculating depreciation.