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Should you deduct resale value of an asset when calculating straight line depreciation?
Wiki User
∙ 13y ago
Yes you should. That is also known as the residual value and you would minus that from cost and divide by the useful economic lifetime if the asset.
Wiki User
∙ 13y ago
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Is it mandatory to deduct depreciation for the purposes of income tax?
Yes, to the degree the law reads your gain will be calculated from the basis of the depreciation taken or should have been taken.
Is section 179 still valid for taxes Can you still deduct equipment?
Yes. Very much so. It isn't that you can deduct equipment..it is (and was) that you can currently expense (rather than capitalize, and deduct through depreciation over years), up to an certain amount. That amount is being substantially increased.
What is included in the cost basis of a long lived asset?
Depreciation is the process of reducing the historical cost of an asset by an annual amount relating to the amount of asset usage. [ Most assets are recorded at historical costs by accounting departments; based on the type of asset, certain methods must be used to reduce the value of the asset each year. Depreciation affects the company financial statements, moving the depreciation amount from the asset value on the balance sheet to the depreciation expense on the income statement. GAAP Methods Several methods of depreciation are used to record the depreciation expense on the accounting books. The most popular methods include: Straight-Line: This is the simplest depreciation method; it is calculated by subtracting the asset salvage value from the asset's historical cost, then dividing the remaining amount by the useful years of the asset. This creates a constant amount for companies to depreciate each year. Declining Balance: The declining balance method is used for assets with shorter life spans for a company. This allows companies to deduct higher depreciation amounts early in the asset life and lower amounts as the asset is phased out of the company. Companies will usually determine what percentage of the asset will be used each year and multiply it by the asset value to determine annual depreciation. Units of Production: Manufacturing companies may use this method for assets used for production purposes only. It is calculated by subtracting the salvage value from the historical asset cost; this amount is then divided by the total unit production of the machine to get a per-unit depreciation amount. Each month, the units produced are multiplied by the per-unit depreciation amount to calculate the expense. Tax Method When calculating depreciation for U.S. tax purposes, all assets entered into service by a company after 1986 must use the Modified Accelerated Cost Recovery System (MACRS). The Internal Revenue Service (IRS) provides asset classes for companies to determine the useful life and asset salvage value for tax purposes.
Why you deduct amount of dtawin from capital?
we deduct amount of dtawing because the owner take the business goods or any type of asset for personal use.the owners this action reduce the business equity owing to this we should have to deduct the drawing amount from the capital
Why use Sum-Of-Years-Digits Depreciation?
Sum of Years Digits places a higher depreciation value at the ront end of an asset letting you deduct that from your taxes early on. For a new company this is extremely useful because you save more on taxes during the first, most critical years. During the latter part of this process the depreciation amounts will be less which means you will pay more taxes. In the end the same amount is paid, so it all depends when you need the most money.
Is it mandatory to deduct depreciation for the purposes of income tax?
Yes, to the degree the law reads your gain will be calculated from the basis of the depreciation taken or should have been taken.
Can self-employed couple deduct depreciation on business equipment when calculating income in determining continued eligibility for food stamps?
No. See 7 C.F.R. Sec. 273.11(b)(2)(iii)
Use the word deduct in a sentence?
When calculating your taxes, remember to list the property tax payment as a deduction, so you pay less tax.
Is section 179 still valid for taxes Can you still deduct equipment?
Yes. Very much so. It isn't that you can deduct equipment..it is (and was) that you can currently expense (rather than capitalize, and deduct through depreciation over years), up to an certain amount. That amount is being substantially increased.
The Accumulated Depreciation's account balance is the sum of depreciation expense recorded in past periods true or false?
Yes. Accumulated depreciation is a contra asset account, which means it has an opposite balance from a normal asset account. It is used to reduce the balance whatever asset you are deprecating. When you total your assets on the balance sheet, you deduct the cost of Accumulated depreciation from your assets to get the true worth of your assets.
Why depreciation is charged on assets?
depreciation -- Decline in the value of a currency, financial asset, or capital good. When applied to a capital good, depreciation usually refers to loss of value because of obsolescence, wear, or destruction (as by fire or flood). Book depreciation (also known as tax depreciation) is the depreciation that the tax code allows businesses to deduct when they calculate their taxable profits. It is typically faster than economic depreciation, which represents the actual decline in the value of the asset. Both measures of depreciation appear as part of the national income and product accounts.another definition...depreciation -- Decrease in the value of equipment from wear and tear and the passage of time. Depreciation on business equipment is generally deductible for tax purposes.another definition...depreciation -- the decline in the dollar value of an asset over time and though use. The amount of annual depreciation may be computed differently for tax purposes than the actual decline in value.
How do you get the Indians to pay for hospital and delivery costs?
Deduct the charges straight from there reserves. No money at the reserve, no treatment.
Can an employer in Louisiana deduct an overpayment from the employee's final paycheck?
Yes. Otherwise, how would they get their money, what check should they deduct it from?
Is it allowed to deduct the number of absences in 13Th month pay?
No. It should not.
How does depreciation generate actual cash flows for the company?
Depreciation does not generate cash flow. If a million dollar piece of equipment is purchased, an accountant would reflect that the company now owns a million dollar asset. Without depreciation, the company would still show a million dollar asset on the books even though we all know the equipment's value is decreasing. As such, the company's value would be overstated in the books. I found this from Wikipedia, so I believe the above answer should be modified. From Wikipedia - "Depreciation recognized for tax purposes will, however, affect the cash flow of the company, as tax depreciation will reduce taxable profits; there is generally no requirement that treatment of depreciation for tax and accounting purposes be identical. Where depreciation is shown on accounting statements, the figure usually does not relate to depreciation for tax purposes." - The above answer is correct. This is an additional point. Depreciation is a source of funds (not cash). Think about this - When you deduct depreciation from your profits, your net income figure gets reduced and if there is any distribution of cash which is based on net income, the amount of cash that is going out of the business will also be reduced. In that way, the company is able to retain part of its cash within the business that could have gone out, had the depreciation not been done. Additional comment - And even more to add regarding the taxes thing (at least in Canada). Depreciation is not an allowable expense for calculating taxable income. What happens is that you add the depreciation that you expensed back, but then you are allowed to take a deduction for capital cost allowance (at specified rates for the particular class of asset) to calculate taxable income. In the US it is a a legit expense and is typical done with straight line or MACRS. Additional comment - Regarding the first post: depreciation in accounting terms (amortization) is not meant to reflect the value of the asset. Rather, it is the gradual allocation of its cost to expense over its useful life. The fair market value of an asset may increase significantly over its original purchase price while at the same time its book value will decrease yearly due to depreciation. Strictly speaking, depreciation is a non-cash expense (no physical outflow of cash is involved). However, as mentioned above by others, it serves to reduce taxable income, which, in turn, reduces the income tax paid.
What is included in the cost basis of a long lived asset?
Depreciation is the process of reducing the historical cost of an asset by an annual amount relating to the amount of asset usage. [ Most assets are recorded at historical costs by accounting departments; based on the type of asset, certain methods must be used to reduce the value of the asset each year. Depreciation affects the company financial statements, moving the depreciation amount from the asset value on the balance sheet to the depreciation expense on the income statement. GAAP Methods Several methods of depreciation are used to record the depreciation expense on the accounting books. The most popular methods include: Straight-Line: This is the simplest depreciation method; it is calculated by subtracting the asset salvage value from the asset's historical cost, then dividing the remaining amount by the useful years of the asset. This creates a constant amount for companies to depreciate each year. Declining Balance: The declining balance method is used for assets with shorter life spans for a company. This allows companies to deduct higher depreciation amounts early in the asset life and lower amounts as the asset is phased out of the company. Companies will usually determine what percentage of the asset will be used each year and multiply it by the asset value to determine annual depreciation. Units of Production: Manufacturing companies may use this method for assets used for production purposes only. It is calculated by subtracting the salvage value from the historical asset cost; this amount is then divided by the total unit production of the machine to get a per-unit depreciation amount. Each month, the units produced are multiplied by the per-unit depreciation amount to calculate the expense. Tax Method When calculating depreciation for U.S. tax purposes, all assets entered into service by a company after 1986 must use the Modified Accelerated Cost Recovery System (MACRS). The Internal Revenue Service (IRS) provides asset classes for companies to determine the useful life and asset salvage value for tax purposes.
Why you deduct amount of dtawin from capital?
we deduct amount of dtawing because the owner take the business goods or any type of asset for personal use.the owners this action reduce the business equity owing to this we should have to deduct the drawing amount from the capital
