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Balance Sheet Equations

The document discusses different methods for calculating depreciation expense and tracking changes in book value over time, including the straight-line method, declining balance method, and sum-of-the-years'-digits method. It also shows the calculations and steps involved in tracking principal and interest payments, outstanding loan balances, and interest income or expense over multiple periods for a loan.

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darryk darr
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34 views2 pages

Balance Sheet Equations

The document discusses different methods for calculating depreciation expense and tracking changes in book value over time, including the straight-line method, declining balance method, and sum-of-the-years'-digits method. It also shows the calculations and steps involved in tracking principal and interest payments, outstanding loan balances, and interest income or expense over multiple periods for a loan.

Uploaded by

darryk darr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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B ALANC E SHEET EQ U ATIO NS

 Straight-Line Method

 Declining Balance Method


( )

* Depreciation rate for double declining balance method

* Depreciation rate for 150% declining balance method

Year Book Value Depreciation Rate Depreciation Book Value at the


at the beginning (a) Expense (b) year-end (c)
200A (1) a% (1) * a (1) - (b)
200B (c) a% (c) * a (c) - (b)
200C (c) a% (c) * a (c) - (b)
200D (c) a% (c) * a (c) - (b)
200E (c) a% (c) * a (should be equal
to salvage value,
if any)

 Sum-of-the-Years’-Digit Method

( )

( )

( )
Where: n = number of years for useful life; x = specific year

Present Values, Future Values and Interest Income (Expense)

Where: n = # of payments in intervals


R = Periodic payment
Ik = interest paid after the Kth payment
PRk = principal repaid just after the Kth payment
OLk = outstanding principal just after the Kth payment

Ik = Previous OL times interest rate (OLk-1 * i)


PRk = R - Ik
OLk = OLk-1 - PRk

WWW.ACCOUNTINGASSIGNMENTHELP.NET
Step 1:
n R Ik PRk OLk
0 Insert A here
1 Insert R here
2 Insert R here
3 Insert R here
Total

Step 2:
N R Ik PRk OLk
0 84000
1 33184.60 Multiply OL0 by i here
2 33184.60
3 33184.60
Total

Step 3:
N R Ik PRk OLk
0 84000
1 33184.60 7560 Subtract R1 by I1 here
2 33184.60
3 33184.60
Total

Step 4:
N R Ik PRk OLk
0 84000
1 33184.60 7560 25624 Subtract OL0 by PR1 here
2 33184.60
3 33184.60
Total

Step 5:
N R Ik PRk OLk
0 84000
1 33184.60 7560 25624 58375.40
2 33184.60 Multiply OL1 by i here
3 33184.60
Total

Step 6:
N R Ik PRk OLk
0 84000
1 33184.60 7560 25624 58375.40
2 33184.60 5253.79 Subtract R2 by I2 here
3 33184.60
Total

WWW.ACCOUNTINGASSIGNMENTHELP.NET

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