Use of EstimatesExamples of Estimat

Use of Estimates

Examples of Estimates

The calculation of depreciation (shown at the end of Part 1) included two estimates:

Salvage value. Salvage value is the estimated amount that a company will receive when it disposes of an asset at the end of the asset's useful life. Often the salvage value is estimated to be zero. However, we assumed $500 in order to demonstrate how an amount would be handled. Salvage value is also referred to as disposal value, scrap value, or residual value.
Useful life. The useful life of an asset is an estimate of how long the asset will be used (as opposed to how long the asset will last). For example, a graphic artist might purchase a computer in 2013 and expects to replace it in 2015 with a more advanced computer. Hence the graphic artist's computer will have an estimated useful life of 2 years. An accountant purchasing a similar computer in 2013 expects to use it until 2017. The accountant will use an estimated useful life of 4 years when computing depreciation. Both the graphic artist and the accountant are correct—the graphic artist in using 2 years and the accountant in using 4 years—even if the computers will be in working order for many years after their useful lives end.
Changes in Estimates

Whenever estimates are used in accounting, it is possible they will change as time moves forward. For example, a company bought a machine for $14,000 on January 1, 2009. At the time it was estimated to have no salvage value at the end of its useful life estimated to be 7 years. The company used straight-line depreciation. In 2013 the company realizes that technology will cause the machine to be obsolete by December 31, 2014 and there will be no salvage value at that time. Instead of the original useful life of 7 years, the company now estimates a total useful life of only 6 years (January 1, 2009 through December 31, 2014). This change in the estimated useful life affects only the current and future years. In other words, in this example the depreciation for 2013 and 2014 will be affected. The depreciation already reported for the years 2009, 2010, 2011, and 2012 cannot be changed. Any amount not depreciated as of December 31, 2012 will have to be depreciated over the years 2013 and 2014.

Let's first calculate the straight-line depreciation using the estimates in January 2009:

ผลลัพธ์ (อังกฤษ) 3:

Use of Estimates

Examples of Estimates

The calculation of depreciation (shown at the end of Part 1) included two estimates:

Salvage. Value. Salvage value is the estimated amount that a company will receive when it disposes of an asset at the end of the. Asset 's useful life. Often the salvage value is estimated to be, However zero.We assumed $500 in order to demonstrate how an amount would be handled. Salvage value is also referred to as, disposal value. Scrap value or residual, value.
Useful life. The useful life of an asset is an estimate of how long the asset will be used. (as opposed to how long the asset will last, For example).A graphic artist might purchase a computer in 2013 and expects to replace it in 2015 with a more advanced computer. Hence. The graphic artist 's computer will have an estimated useful life of 2 years. An accountant purchasing a similar computer. In 2013 expects to use it until 2017. The accountant will use an estimated useful life of 4 years when computing depreciation.Both the graphic artist and the accountant are correct - the graphic artist in using 2 years and the accountant in using 4 years - even. If the computers will be in working order for many years after their useful lives end.
Changes in Estimates

Whenever estimates. Are used in accounting it is, possible they will change as time moves forward. For example a company, bought a machine for. , $14000 on, January 1 2009. At the time it was estimated to have no salvage value at the end of its useful life estimated to. Be 7 years. The company used straight-line depreciation. In 2013 the company realizes that technology will cause the machine. To be obsolete by, December 31 2014 and there will be no salvage value at that time. Instead of the original useful life. Of, 7 yearsThe company now estimates a total useful life of only 6 years (January 1 2009 through, December, 31 2014). This change. In the estimated useful life affects only the current and future years. In, other words in this example the depreciation. For 2013 and 2014 will be affected. The depreciation already reported for the years 2009 2010 2011,,, 2012 and cannot be. Changed.Any amount not depreciated as of, December 31 2012 will have to be depreciated over the years 2013 and 2014.

Let s first. ' Calculate the straight-line depreciation using the estimates in January 2009: