FO and FA Depreciation Computation

Created by Erika Go, Modified on Wed, 13 Nov, 2024 at 11:55 AM by Erika Go

A2000 ONLINE SUPPORT DEPARTMENT

KNOWLEDGE BASE
Description:

FO computation in depreciation

DEPRECIATION AMT = (acquired price - acc depn) / remaining life

FA Computation in depreciation

DEPRECIATION AMT = ((acquired price * exchange rate) - (salvage value* exrate))/ deprelife

The formula is Depreciation = (Asset Price - Accumulated Depreciation) / (Remaining Life).

SCENARIO 1 (FA Transaction)

Asset worth $12,000 was bought with under FA Transaction. It originates in our system. and has a life span of 120 months. Since it is newly acquired, there are no Accumulated Depreciation. Therefore, with a Remaining Life = 120 months, the calculation is:

Depreciation = (Asset Cost - Accumulated Depreciation) / (Remaining Life)

Depreciation = (12000 - 0) / 120 months = $100 per month.

SCENARIO 2 (FO Transaction)

Asset worth $12,000 was bought 48 months ago (booked under another system). It does not originate in our system. Although it has a life span of 120 months, 48 months had already passed. Only 72 months is the Remaining Life. From the past, there were 48 months of depreciation done, and so there was an Accumulated Depreciation (carried forward in Balance Sheet) of 48 x $100 = $4800.

If they start to use A2000ERP today, it has to come into our system as a FO (Opening Transaction). Therefore, with a Remaining Life of 72 months, the calculation is:

Depreciation = (Asset Cost - Accumulated Depreciation) / (Remaining Life) Depreciation = (12000 - 4800) / 72 months = $100 per month.

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