Title: 
Headings: Chapter Outline Notes
Chapter
 
Outline
 
Notes
 

II.
 

E.
 
Lump-Sum
 
Purchase
 

III.
 

Additional
 
Expenditures
 

VI.
 

VII.
  
Decision
 
Analysis—Total
 
Asset
 
Turnover
 

FORMULAS
 
FOR
 
DEPRECIATION
 
METHODS
 


  
STRAIGHT
 
LINE
 

Cost
 
-
 
Estimated
 
salvage
  
Estimated
 
useful
 
life
 

2.
  
UNITS
 
OF
 
PRODUCTION
 

3.
  
DOUBLE-DECLINING
 
BALANCE
 


Content: Land
 
is
 
not
 
depreciated. Land
 
Improvements—costs
 
that
 
increase
 
the
 
usefulness
 
of
 
the
 
land. Land
 
improvements
 
have
 
limited
 
useful
 
lives
 
and
 
are
 
used
 
up. Examples
 
include
 
parking
 
lot
 
surfaces,
 
driveways,
 
fences,
 
and
 
lighting
 
systems. Costs
 
are
 
charged
 
to
 
a
 
separate
 
Land
 
Improvement
 
account
 
so
 
that
 
their
 
costs
 
can
 
be
 
allocated
 
to
 
the
 
periods
 
they
 
benefit. Buildings
 

 
When
 
purchased,
 
costs
 
usually
 
includes
 
its
 
purchase
 
price,
 
brokerage
 
fees,
 
taxes,
 
title
 
fees,
 
attorney
 
costs,
 
and
 
all
 
expenditures
 
to
 
make
 
it
 
ready
 
for
 
its
 
intended
 
use
 
including
 
any
 
necessary
 
repairs
 
or
 
renovations
 
such
 
as
 
wiring,
 
lighting,
 
flooring
 
and
 
wall
 
coverings. If
 
constructed
 
for
 
own
 
use,
 
cost
 
includes
 
materials
 
and
 
labor
 
plus
 
a
 
reasonable
 
amount
 
of
 
indirect
 
overhead
 
costs,
 
such
 
as
 
heat,
 
lighting,
 
power,
 
and
 
depreciation
 
on
 
machinery
 
used
 
to
 
construct
 
the
 
asset. Cost
 
also
 
includes
 
design
 
fees,
 
building
 
permits,
 
and
 
insurance
 
during
 
construction
 
(but
 
not
 
after
 
it
 
is
 
placed
 
in
 
use; insurance
 
then
 
becomes
 
an
 
operating
 
expense). Machinery
 
and
 
Equipment
 

Costs
 
include
 
all
 
normal
 
and
 
necessary
 
expenditures
 
to
 
purchase
 
and
 
prepare
 
them
 
for
 
intended
 
use,
 
including
 
purchase
 
price,
 
taxes,
 
transportation
 
charges,
 
insurance
 
while
 
in
 
transit,
 
and
 
the
 
installing,
 
assembling
 
and
 
testing
 
of
 
the
 
machinery
 
and
 
equipment.