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Chapter 2: 2-4DQ (page 46)

What is the difference between accumulated depreciation and depreciation expense? How are they related?

Short Answer

Expert verified

Accumulated depreciation is defined as the total depreciation charged on the asset of the company since the asset was purchased and used. The depreciation expense is used to compute the accumulated depreciation.

Step by step solution

01

Difference between the accumulated depreciation and the depreciation expense 

Depreciation expense is referred to the depreciation of one period, and accumulated depreciation is referred to the aggregate depreciation of all the periods during which the asset is held by the company.

02

Relation between the accumulated depreciation and the depreciation 

Depreciation is charged to record the usage cost of the asset with the benefit gained from its use.And the accumulated depreciation is the total of all the recorded depreciation charged on the asset on a specific date.

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Most popular questions from this chapter

Given the following information, prepare an income statement for Jonas Brothers Cough Drops.

Selling and administrative expenses

$328,000

Depreciation expenses

195,000

Sales

1,660,000

Interest expenses

129,000

Cost of goods sold

560,000

Taxes

171,000

Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.

Sales

1,360,000

Shares outstanding

104,000

Cost of goods sold

700,000

Interest expenses

34,000

Selling and administration expenses

49,000

Depreciation expenses

23,000

Preferred stock dividend

86,000

Taxes

100,000

Baker Oats had an asset turnover of 1.6 times per year.

b. The following year, on the same level of assets, Baker’s assets turnoverdeclined to 1.4 times and its profit margin was 8 percent. How did the returnon total assets change from that of the previous year?

Identify whether each of the following items increases or decreases cash flow:

Increase in accounts receivable

Decrease in prepaid expenses

Increase in notes payable

Increase in inventory

Depreciation expense

Dividend payment

Increase in investment

Increase in accrued expenses

Decrease in account payable

Stein Books Inc. sold 1,900 finance textbooks for \(250 each to High Tuition University in 20X1. These books cost \)210 to produce. Stein Books spent \(12,200 (selling expense) to convince the university to buy its books. Depreciation expense for the year was \)15,200. In addition, Stein Books borrowed $104,000 on January 1, 20X1, on which the company paid 12 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm’s tax rate is 30 percent. Did Stein Books make a profit in 20X1? Please verify with an income statement.
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