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      08-10-2015, 03:26 PM   #89
paradoxical3
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There are so many other considerations. For example, if you have a business you can run the least through.

I am dying to lease a GT3 through my company for 2 years. Porsche leases are terrible compared to BMW leases, but you can deduct business use from the payment and since the terms are so terrible, the residual is like 75k for a $150k msrp GT3 at the end of the lease.

Privately buy out the GT3 from your company at end of lease for 75k = instant $25k of profit.
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      08-10-2015, 03:54 PM   #90
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Quote:
Originally Posted by paradoxical3 View Post
There are so many other considerations. For example, if you have a business you can run the least through.

I am dying to lease a GT3 through my company for 2 years. Porsche leases are terrible compared to BMW leases, but you can deduct business use from the payment and since the terms are so terrible, the residual is like 75k for a $150k msrp GT3 at the end of the lease.

Privately buy out the GT3 from your company at end of lease for 75k = instant $25k of profit.
More great advice,

but what if someone does not have a company? Any scenario where leasing a car then buying it out at the end of the lease is cheaper than buying?

I have also never leased a car so don't exactly understand how the lease buy out dynamics work? If you don't have the cash up front can you still use a private loan to buy the vehicle at the amount allotted?
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      08-10-2015, 04:33 PM   #91
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Quote:
Originally Posted by DJKapeesh View Post
More great advice,

but what if someone does not have a company? Any scenario where leasing a car then buying it out at the end of the lease is cheaper than buying?

I have also never leased a car so don't exactly understand how the lease buy out dynamics work? If you don't have the cash up front can you still use a private loan to buy the vehicle at the amount allotted?
leasing is not cost efficient 9/10 times. The times it is, is when depreciation is more than the cost of the lease.

Ex: (Hypothetical round numbers for ease of understanding) Guy buys Porsche for $200k. In 2 years, Guy wants to sell Porsche, but depreciation is 25% in those 2 years. Guy takes a $50k loss due to depreciation.

Guy leases Porsche for 24 months @ $1500/month with $10k down. At the end of the lease, guy is out $36k in Lease payments and $10k for the downpayment. Total out of pocket is $46k, so this would be the cheaper option.

For the people that just cant afford a car, and think leasing for 3yrs at $300/month then buy the car back at a ridiculously high price, this is a bad decision. This is the typical lease scenario where someone is trying to live outside their means, and the dealer takes advantage of it through low lease payments. The dealer always makes out in the end on a lease, no matter how you look at it.

My sister in law leases her cars, and for a $40k SUV, will pay $16k+/- over the term of the lease, another 5k in the downpayment/fees, and at the end of it, have the option to buy the car back at 75% of its original price ($30k). So if she does that, she just paid $51k for a $40k SUV, or lost $11k over the depreciation (16+5-10).

As for buying out the car at the end of the lease, it depends on the car, but most times, it is not going to make financial sense to do it. Also, you can get a loan on it; it is similar to buying a used vehicle.
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      08-10-2015, 08:24 PM   #92
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Quote:
Originally Posted by DJKapeesh View Post
When buying a car that you don't plan to keep for more than 3 years in most cases depending on the car price and depreciation you may loose less on leading the vehicle.

Was my take away from this conversation
You cannot call that "good advise" mate. For who in your little scenarios would that apply to?
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      08-10-2015, 11:20 PM   #93
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Quote:
Originally Posted by P1et
Quote:
Originally Posted by DJKapeesh View Post
When buying a car that you don't plan to keep for more than 3 years in most cases depending on the car price and depreciation you may loose less on leading the vehicle.

Was my take away from this conversation
You cannot call that "good advise" mate. For who in your little scenarios would that apply to?
I advised that my situation is not normal- nor was it meant to be taken as advice. OP got a good idea as to how ONE scenario can be done, not be "car poor" and still live well within my means at the ripe age of 27.

I don't believe in a 9-5 nor a college education (with the obvious exceptions if your dream is to be a doctor, nurse, lawyer etc) that would require the proper training. That old wives tale that going to school will lead to success/financial security- is dead.

Clearly, I have a problem with authority/being a yes men, so thank goodness everything worked out for me in my scene aye?
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      08-11-2015, 08:00 AM   #94
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Quote:
Originally Posted by csu87 View Post
...[The wealthy people I know all] lease their exotic cars. The theory is they can all afford to buy one every couple years, and most do, so it doesn't make sense to take a huge hit on depreciation when the lease is less than what the depreciation is.

...
Okay....that's not the "theory" I would apply were I to get an expensive exotic car. I'd definitely lease it before I bought it, but only because I think I want it as a toy, or because I was "toying" with which one I might want to buy and keep. If I decided I wanted to keep the car, I'd convert the lease contract to a purchase contract. I'm sure you've seen folks buy exotic cars. It's actually not all that uncommon to do so, or purchase it from the start, with so-called exotics that one can use for decades on end, such as large Mercedes limos, Rolls and Bentleys, and other such uncommon cars.

It makes sense to pay only for the financial value of the vehicle that one will consume, which is what a short term lease (1-36 months) is. Conceptually, it's no different than why folks rent hotel rooms or vacation homes, or take out time shares, instead of buying accommodations. As with non-exotics, however, leasing generally makes more financial sense if one wants to have a new/different vehicle every few years.

That sort of desire is quite consistent with younger folks and the lifestyle of young or young-ish successful folks. At my life stage, any exotic car I consider is one I would like to "play with" for a little while and be done with it, or it's one I'll want to keep as my "special" car for the foreseeable remainder of my life, and hopefully one that if I live to be too old to drive myself, one that will be comfortable to be driven in.

I recall a family friend (now deceased) who bought a new Rolls like the one below when he went into semi-retirement back in the 1980s. He kept it and drove it, along with a far more "regular" car for some 20 years until he died. That's roughly what I see myself doing if I get an exotic car of some sort. I just feel like with a car of that nature and myself headed into my twilight years, the idea of "a nice old car is still a nice car" works perfectly well for me. I might not have felt that way were I to have sought such a car in my 20s - 40s.



I don't have the first clue of what you are getting at when you mention "depreciation." Depreciation wouldn't come into play unless the car has a business use. Even if one can claim a business use for the vehicle, it'll take four years to book ~$12K - $13K of depreciation, less if the business use is only partial. Plus, since cars are 5-year property, one'll only get a tiny bit of depreciation no matter what one does.

I do realize that what you might be trying to describe has something to with a decline in market value of the leased property, which is not at all what depreciation is. (http://www.accountingtools.com/overview-of-depreciation -- notice the first sentence's words "recorded cost") Decreases (or increases) in the market value of inventory (which is what a leased car is to the lessor) is reflected in the minimum monthly (annual) lease payment as well as in the stated residual value of the leased property. At the time of lease signing, it's just an estimate, but make no mistake, the lessor will estimate in his favor, not that of the lessee.

All the best.
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      08-11-2015, 08:25 AM   #95
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O great, another Tony post that only sort of replies to my comment where he tries to prove me wrong but doesn't look at the whole comment...

If you read my post, i was talking about them leasing for a couple years, then getting a new one.

If you also read my posts and tried to comprehend them, depreciation is used as depreciation in value of the vehicle.

The examples i gave above, involve what i was talking about; selling the car to get a new one after a couple years. The car's value depreciates $50k in 2yrs, and the lease only costs them $46k in those 2 years. If they didn't pay cash and buy the car outright, there is even more loss money.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
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      08-11-2015, 11:12 AM   #96
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What did I write that gave you cause to go on the defensive? Most of what I wrote expressed my own approach and view point about leasing vs. buying an exotic car. I didn't say you were wrong at all. That's you thinking I did. I wonder why you invented that thought all on your own?

I didn't try to prove you wrong other than to clarify the use of the term depreciation, which is a judgmentally determined thing and one that's determined by an owner of a depreciable asset, not the lessor or lessee of an inventory asset. Many things have changed in the 30 years I've been an accountant, but the concept of depreciation and what it is is not among them. I don't care what "loosey goosey" definition you come by for the term, what happens to the market value of a car over time is not depreciation. It's a decline in market value, not a decline in the net asset cost/value of depreciable items recorded in anyone's books of record.

All the best.
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      08-11-2015, 11:42 AM   #97
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It's cool you don't understand. Some people don't and that's ok.

You are talking about depreciation as it relates to accounting and recording practices. I use this all the time for my construction equipment and know all about it. If you want to know how to use it, i can help you out there.

I am talking about depreciation as it relates to the reduction of value.

From the same source i gave you the definition from. Read the synonyms; these are the terms you are saying aren't depreciation.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
synonyms: devaluation, devaluing, decrease in value, lowering in value, reduction in value, cheapening, markdown, reduction; More
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      08-11-2015, 12:50 PM   #98
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Quote:
Originally Posted by csu87 View Post
It's cool you don't understand. Some people don't and that's ok.

You are talking about depreciation as it relates to accounting and recording practices. I use this all the time for my construction equipment and know all about it. If you want to know how to use it, i can help you out there.

I am talking about depreciation as it relates to the reduction of value.

From the same source i gave you the definition from. Read the synonyms; these are the terms you are saying aren't depreciation.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
synonyms: devaluation, devaluing, decrease in value, lowering in value, reduction in value, cheapening, markdown, reduction; More
So which is this?

Car made in 2015 model sits on a lot brand new until 2017. The car is now still never used but worth less money due to demand.
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      08-11-2015, 03:30 PM   #99
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Originally Posted by DJKapeesh View Post
So I enjoy putting food out for the TROLLS while getting some pretty good advice from a few wise members about finance.

This time I want to make sort of a game of scenarios where you give your (good or bad) advice about the financial situation in each scenario.

So here we go:
Assumption: These people need a car.
What car should the person in each scenario drive?

Assumption: These people have no investments and just cash savings
What should this person do with their savings?

Assumption: Retirements is being maxed at 5k per year.
What should this person save per paycheck?

Others?

BIG QUESTION FOR THE ELITE
What we are looking for now is someone who can afford (EXOTICS) and making over 200k yearly to explain how you got there and what it took to get to this level?

Seems some of us consider 75k a sweet spot that doesn't change until this level of income but are unsure how to reach it????
Yikes, this post and thread are a disaster! If you are a car enthusiast, spend a little more and have fun but never at the sake of your retirement and savings. Those scenarios and the savings/retirement are atrocious. You asked for financial advice. Well, don't waste those early years for savings and miss out on the miracle of compound interest. 135 is a great car, stop trying to be a 50k millionaire.

200k isn't even close to exotic money. Think 7 figure income.

Bonus question answer: Too little info but to "afford" a 50k ride you had better already be maxing out 401k and IRA, HSA if applicable, have an emergency fund at minimum and consider additional cash savings for future home down payment or other expense.

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      08-11-2015, 05:16 PM   #100
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Quote:
Originally Posted by DJKapeesh View Post
So which is this?

Car made in 2015 model sits on a lot brand new until 2017. The car is now still never used but worth less money due to demand.
The car will have depreciated in value (depreciation). Its not some fancy thing. If they bought it at $50k and sell at $40k then it depreciated $10k in the 2 years.

There is depreciation, the reduction of value in an asset, and there is how you account for depreciation which takes into account original price, residual value, useful life....
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      08-12-2015, 05:34 AM   #101
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Quote:
Originally Posted by DJKapeesh View Post
So which is this?

Car made in 2015 model sits on a lot brand new until 2017. The car is now still never used but worth less money due to demand.

Quote:
Originally Posted by csu87 View Post
Quote:
It's cool you don't understand. Some people don't and that's ok.

You are talking about depreciation as it relates to accounting and recording practices. I use this all the time for my construction equipment and know all about it. If you want to know how to use it, i can help you out there.

I am talking about depreciation as it relates to the reduction of value.

From the same source i gave you the definition from. Read the synonyms; these are the terms you are saying aren't depreciation.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
synonyms: devaluation, devaluing, decrease in value, lowering in value, reduction in value, cheapening, markdown, reduction; More
The car will have depreciated in value (depreciation). Its not some fancy thing. If they bought it at $50k and sell at $40k then it depreciated $10k in the 2 years.

There is depreciation, the reduction of value in an asset, and there is how you account for depreciation which takes into account original price, residual value, useful life....
Note to DJKapeesh:
This is longish, and I'm sorry for that. It's long because I'm writing this in simplified layman's terms rather than referring you to an accounting text on the WWW. It'd be far longer there. The first italicized paragraph below is the short answer to your question.

That isn't depreciation at all. It's a decline in inventory value that resulted either from obsolescence or other market forces. Depreciation doesn't apply to inventory. One can book an inventory write-down, but one cannot record depreciation in connection with the drop in value.

Depreciation applies only to fixed assets. Amortization applies to long term intangible assets. Depletion applies to mines, aquifers and fossil fuel deposits, but not the things extracted from the mines/deposits; those "things" are inventory.

Depreciation (and the related concepts of asset amortization/depletion) is something that is 100% internal to the entity that holds title to the asset being depreciated. In order to determine what depreciation is, one must define the "useful life" of the item in question. Next one chooses a depreciation method. (There are several, but "straight line" is the most often chose one because it "gets the job done," and is easily calculated. Units of production is the method most often used for depletable assets.) Having made those two elections, one determines whether the item will have a salvage value.

At this point one can calculate the annual, monthly or daily depreciation expense as follows (straight line is what I'll use because it is simple):

Historic cost - salvage value = depreciable asset cost (DAC)
DAC/useful life = annual depreciation amount (ADA)
ADA/12 = monthly depreciation expense.

When one buys a depreciable asset, it's always recorded in the books at historic cost. Let's say that in month 2 of one's fiscal year one buys a $14,000 asset that has a useful life of 10 years and a $2K salvage value. It's annual depreciation is $1200 and the monthly depreciation is $100. Depreciation begins when the item is placed in service. We'll assume the asset goes into service in the same period in which it's purchased.

  • Start of Month 1:
    Looking in one's balance sheet t the start of month one sees only the following:
    Asset Cost: $14,000
    Net Book Value: $14,000
  • End of Month 1:
    At the end of month one, one records depreciation expense and one's balance sheet shows the following:
    Asset Cost: $14,000
    Accumulated Depreciation: $100
    Net Book Value: $13,900

    There is also an income statement impact and it appears as:
    Depreciation Expense: $100
  • Month 2: Balance Sheet
    Asset Cost: $14,000
    Accumulated Depreciation: $200
    Net Book Value: $13,800

    Month 2: Income Statement
    Depreciation Expense: $200
The sequence continues like that for ten years and at the end of the tenth year, one sees the following
  • Balance Sheet
    Asset Cost: $14,000
    Accumulated Depreciation: $12,000
    Net Book Value: $2,000
  • Income Statement
    Depreciation Expense: $100
    Why just $100?
    • The asset was placed in service and depreciated in month two of its purchase fiscal year, which means that in the first year if it's life we took 11 months of depreciation expense against it. Thus in its final fiscal year of useful life, we'll take only one month.
    • Because at the end of each fiscal year, the totality of the income statement (Net profit or loss --> Income Summary) is closed to the balance sheet; thereby resulting in an income statement that begins at zero for all accounts at the start of every fiscal year. The entry that does that is what transfers a given year's net profit (or loss) to a business' equity account. The depreciation expense recorded in the prior years has already been transferred to the equity account and is this reflected in its balance.
Now, with that out of the way, we are in a position to see why the decline in market value has nothing to do with depreciation.

Let's say that after depreciating the asset for one year, the owner of our asset were to sell it. The correct calculation to determine whether there is a gain or loss on the sale is as follows:

NBV - selling price = gain/loss on sale of asset or
$13,000 - selling price = gain/loss on sale of asset

If the seller sells it for $13,500, s/he has a gain. If it's sold for $12,000, s/he has a loss. The selling price, strictly called "fair market value," determines whether there is a gain or loss. The depreciation that's been recorded in association with the asset is the same $1,000 no matter what the selling price is. ("Fair market value" is whatever sum is mutually agreed upon in an "arms length" transaction between a buyer and a seller.)

What CSU87 has been attempting to assert is in substance the following:
Purchase price (PP) - selling price (SP) = depreciation (expense).
Well, that's just not what depreciation is and it's not how it's calculated. What PP - SP equals is an increase or decrease in fair market value, not depreciation. Moreover, many things can cause that increase or decrease, but depreciation is not one of them. Also worth noting is that the net book value of an asset is its value in the owner's book of record. It has absolutely nothing to do with how much that item is worth on the open market.

Having now discussed how depreciation is calculated, let's consider what it is. In short it's the application of what is called the "matching principle." Depreciation is the means by which the use of an entity's long term property is matched over time to the revenues it helps generate. (See PDF page 36, sections 144ff here: http://www.fasb.org/cs/BlobServer?bl...lication%2Fpdf) In effect the cost of the asset is divided up with some of the cost being reported on each of the income statements issued during the life of the asset. By assigning a portion of the asset's cost to various income statements, the accountant is matching a portion of the asset's cost with each period in which the asset is used. Hopefully this also means that the asset's cost is being matched with the revenues earned by using the asset.


Red:
Well, actually CSU87, it's I who is willing to deem it "okay that you don't understand" accounting, even the most basic elements of it that one learns within the first four weeks or so of Principles of Accounting I. It's a discipline that seems to have straightforward enough principles and practice, but in fact it actually requires a bit of training for one to understand how to interpret and apply its principles. I hardly expect most folks to read FASB statements and bulletins in order to fully grasp them.

Blue:
The only "sense" for which the term depreciation has any meaning is the accounting sense. I bid you find any authoritative writer who describes what depreciation is and how to calculate it and you'll find that what they are writing about is the accounting application of the term. The definition of deprecation you provided isn't wrong by any means.

It's your interpretation and application of it that's mistaken. As I noted just above, I don't expect that non-accountants should have a full enough understanding of what depreciation is to interpret it differently. I do, however, expect that intelligent people realize when their knowledge is insufficient to speak/write authoritatively about it.

There's no question in my mind that as the bookkeeper for your company you are quite capable of applying straight line depreciation to your construction equipment. You may even be able to apply accelerated or units of production depreciation to those items. The thing is that doing so, even doing so well and accurately, isn't the same as knowing how to apply accounting principles and interpret the FASB's statements.

What I understand about depreciation, in fact accounting -- tax, audit, forensic accounting, accounting systems, cost accounting and managerial accounting -- as a business discipline, is both the theory and the practice in the private, non-profit and public sectors.

All the best.
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      08-12-2015, 05:37 AM   #102
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Quote:
Originally Posted by tony20009
Quote:
Originally Posted by DJKapeesh View Post
So which is this?

Car made in 2015 model sits on a lot brand new until 2017. The car is now still never used but worth less money due to demand.

Quote:
Originally Posted by csu87 View Post
Quote:
It's cool you don't understand. Some people don't and that's ok.

You are talking about depreciation as it relates to accounting and recording practices. I use this all the time for my construction equipment and know all about it. If you want to know how to use it, i can help you out there.

I am talking about depreciation as it relates to the reduction of value.

From the same source i gave you the definition from. Read the synonyms; these are the terms you are saying aren't depreciation.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
synonyms: devaluation, devaluing, decrease in value, lowering in value, reduction in value, cheapening, markdown, reduction; More
The car will have depreciated in value (depreciation). Its not some fancy thing. If they bought it at $50k and sell at $40k then it depreciated $10k in the 2 years.

There is depreciation, the reduction of value in an asset, and there is how you account for depreciation which takes into account original price, residual value, useful life....
Note: This is longish, and I'm sorry for that. It's long because I'm writing this in simplified layman's terms rather than referring you to an accounting text on the WWW. It'd be far longer there.

That isn't depreciation at all. It's a decline in inventory value that resulted either from obsolescence or other market forces. Depreciation doesn't apply to inventory. One can book an inventory write-down, but one cannot record depreciation in connection with the drop in value.

Depreciation applies only to fixed assets. Amortization applies to long term intangible assets. Depletion applies to mines, aquifers and fossil fuel deposits, but not the things extracted from the mines/deposits; those "things" are inventory.

Depreciation (and the related concepts of asset amortization/depletion) is something that is 100% internal to the entity that holds title to the asset being depreciated. In order to determine what depreciation is, one must define the "useful life" of the item in question. Next one chooses a depreciation method. (There are several, but "straight line" is the most often chose one because it "gets the job done," and is easily calculated. Units of production is the method most often used for depletable assets.) Having made those two elections, one determines whether the item will have a salvage value.

At this point one can calculate the annual, monthly or daily depreciation expense as follows (straight line is what I'll use because it is simple):

Historic cost - salvage value = depreciable asset cost (DAC)
DAC/useful life = annual depreciation amount (ADA)
ADA/12 = monthly depreciation expense.

When one buys a depreciable asset, it's always recorded in the books at historic cost. Let's say that in month 2 of one's fiscal year one buys a $14,000 asset that has a useful life of 10 years and a $2K salvage value. It's annual depreciation is $1200 and the monthly depreciation is $100. Depreciation begins when the item is placed in service. We'll assume the asset goes into service in the same period in which it's purchased.

  • Start of Month 1:
    Looking in one's balance sheet t the start of month one sees only the following:
    Asset Cost: $14,000
    Net Book Value: $14,000
  • End of Month 1:
    At the end of month one, one records depreciation expense and one's balance sheet shows the following:
    Asset Cost: $14,000
    Accumulated Depreciation: $100
    Net Book Value: $13,900

    There is also an income statement impact and it appears as:
    Depreciation Expense: $100
  • Month 2: Balance Sheet
    Asset Cost: $14,000
    Accumulated Depreciation: $200
    Net Book Value: $13,800

    Month 2: Income Statement
    Depreciation Expense: $200
The sequence continues like that for ten years and at the end of the tenth year, one sees the following
  • Balance Sheet
    Asset Cost: $14,000
    Accumulated Depreciation: $12,000
    Net Book Value: $2,000
  • Income Statement
    Depreciation Expense: $100
    Why just $100?
    • The asset was placed in service and depreciated in month two of its purchase fiscal year, which means that in the first year if it's life we took 11 months of depreciation expense against it. Thus in its final fiscal year of useful life, we'll take only one month.
    • Because at the end of each fiscal year, the totality of the income statement (Net profit or loss --> Income Summary) is closed to the balance sheet; thereby resulting in an income statement that begins at zero for all accounts at the start of every fiscal year. The entry that does that is what transfers a given year's net profit (or loss) to a business' equity account. The depreciation expense recorded in the prior years has already been transferred to the equity account and is this reflected in its balance.
Now, with that out of the way, we are in a position to see why the decline in market value has nothing to do with depreciation.

Let's say that after depreciating the asset for one year, the owner of our asset were to sell it. The correct calculation to determine whether there is a gain or loss on the sale is as follows:

NBV - selling price = gain/loss on sale of asset or
$13,000 - selling price = gain/loss on sale of asset

If the seller sells it for $13,500, s/he has a gain. If it's sold for $12,000, s/he has a loss. The selling price, strictly called "fair market value," determines whether there is a gain or loss. The depreciation that's been recorded in association with the asset is the same $1,000 no matter what the selling price is. ("Fair market value" is whatever sum is mutually agreed upon in an "arms length" transaction between a buyer and a seller.)

What CSU87 has been attempting to assert is in substance the following:
Purchase price (PP) - selling price (SP) = depreciation (expense).
Well, that's just not what depreciation is and it's not how it's calculated. What PP - SP equals is an increase or decrease in fair market value, not depreciation. Moreover, many things can cause that increase or decrease, but depreciation is not one of them. Also worth noting is that the net book value of an asset is its value in the owner's book of record. It has absolutely nothing to do with how much that item is worth on the open market.

Having now discussed how depreciation is calculated, let's consider what it is. In short it's the application of what is called the "matching principle." Depreciation is the means by which the use of an entity's long term property is matched over time to the revenues it helps generate. (See PDF page 36, sections 144ff here: http://www.fasb.org/cs/BlobServer?bl...lication%2Fpdf) In effect the cost of the asset is divided up with some of the cost being reported on each of the income statements issued during the life of the asset. By assigning a portion of the asset's cost to various income statements, the accountant is matching a portion of the asset's cost with each period in which the asset is used. Hopefully this also means that the asset's cost is being matched with the revenues earned by using the asset.


Red:
Well, actually CSU87, it's I who is willing to deem it "okay that you don't understand" accounting, even the most basic elements of it that one learns within the first four weeks or so of Principles of Accounting I. It's a discipline that seems to have straightforward enough principles and practice, but in fact it actually requires a bit of training for one to understand how to interpret and apply its principles. I hardly expect most folks to read FASB statements and bulletins in order to fully grasp them.

Blue:
The only "sense" for which the term depreciation has any meaning is the accounting sense. I bid you find any authoritative writer who describes what depreciation is and how to calculate it and you'll find that what they are writing about is the accounting application of the term. The definition of deprecation you provided isn't wrong by any means.

It's your interpretation and application of it that's mistaken. As I noted just above, I don't expect that non-accountants should have a full enough understanding of what depreciation is to interpret it differently. I do, however, expect that intelligent people realize when their knowledge is insufficient to speak/write authoritatively about it.

There's no question in my mind that as the bookkeeper for your company you are quite capable of applying straight line depreciation to your construction equipment. You may even be able to apply accelerated or units of production depreciation to those items. The thing is that doing so, even doing so well and accurately, isn't the same as knowing how to apply accounting principles and interpret the FASB's statements.

What I understand about depreciation, in fact accounting -- tax, audit, forensic accounting, accounting systems, cost accounting and managerial accounting -- as a business discipline, is both the theory and the practice in the private, non-profit and public sectors.

All the best.
That....was pretty long indeed.
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      08-12-2015, 07:53 AM   #103
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And he still doesn't get it.... I am not a book keeper, nor do i claim to be an accountant or an expert, but jesus christ man all you want to do it's argue in Every thread you post. Go start a 328 vs 335 thread and argue till you are blue in the face; or get married.

Just going to leave this here again. You are hung up on #2 as the only definition. Also way to take a thread way off topic.

de·pre·ci·a·tion
dəˌprēSHēˈāSH(ə)n/
noun
1. a reduction in the value of an asset with the passage of time, due in particular to wear and tear.
synonyms: devaluation, devaluing, decrease in value, lowering in value, reduction in value, cheapening, markdown, reduction; More
2. Accounting - An allowance made for a loss in value of property.
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      08-12-2015, 08:24 AM   #104
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CSU87, since you assert that you are not an expert, and I am a CPA, why don't you merely accept that someone who is an accountant might actually know more about the applicability of the term than do you? I can promise you that you will not find one credible source that will cite depreciation as being calculated as you showed, which is to say, as the difference between purchase price and selling price. Not one!

I don't care what definition you can lift from Google. I will repeat myself: "I bid you find any authoritative writer who describes what depreciation is and how to calculate it and you'll find that what they are writing about is the accounting application of the term. The definition of deprecation you provided isn't wrong by any means."

Earlier you thought I was accusing you of being wrong and I told you I wasn't. You clarified what you mean by your use of "depreciation," and now knowing how you mean it, I am saying you are wrong. Had you been correct about how to calculate depreciation, or what concepts are embodied by that term, I would not refute you. But the fact is you are wrong.

All the best.
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      08-12-2015, 09:34 AM   #105
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Quote:
Originally Posted by tony20009
CSU87, I can promise you that you will not find one credible source that will cite depreciation as being calculated as you showed, which is to say, as the difference between purchase price and selling price. Not one!


All the best.
http://www.kbb.com/new-cars/total-co...49976359680300

Kbb, a credible source on used car sales. See red circle "depreciation". Obviously different than the accounting usage of the word but nonetheless not an inaccurate way to describe the loss of value. Certainly, it communicates a concept we all understand.
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      08-12-2015, 11:05 AM   #106
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Quote:
Originally Posted by rad doc View Post
http://www.kbb.com/new-cars/total-co...49976359680300

Kbb, a credible source on used car sales. See red circle "depreciation". Obviously different than the accounting usage of the word but nonetheless not an inaccurate way to describe the loss of value. Certainly, it communicates a concept we all understand.
None of that in here. If you don't believe everything Tony says, you are wrong no matter what
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      08-12-2015, 11:30 AM   #107
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Quote:
Originally Posted by DJKapeesh View Post

[*]Scenario 2
Age: 32
Income: $73,000 yearly, monthly = $4240 after tax
Savings: $25,000 , Retirement: $25,000
Monthly Bills: $1900
(House, Single, Student Loans 15k)
this is by far the best scenario. most retirement, and owns real estate. paying interest on student loans that costs more than the $25k in savings is earning in interest is retarded. kill the student loans with the savings, then continue to save with the remaining $10k.
save/invest at least 10-15%.

should be driving a moderately priced but economical car. probably nothing north of $30k.

to be clear, i don't like any of the scenarios.
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      08-12-2015, 12:00 PM   #108
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Quote:
Originally Posted by rad doc View Post
http://www.kbb.com/new-cars/total-co...49976359680300

Kbb, a credible source on used car sales. See red circle "depreciation". Obviously different than the accounting usage of the word but nonetheless not an inaccurate way to describe the loss of value. Certainly, it communicates a concept we all understand.
I'm not saying that sources that are credible about car values don't use the term. They do use it. What I'm saying is that they misuse it. They use the term because it's a relatively straight forward thing to calculate and because the word itself is the linguistic opposite of "appreciate." It's also not that cars don't depreciate in one's book of record; they do. It's that what depreciation is and what is most often described as depreciation in connection with a car aren't the same things and the latter is not what depreciation is, but it is a decline in market value or market prices. The key distinction is that depreciation is driven by internal business decisions asset owners make, and a drop in market value is driven by, well, the market, that is buyers and sellers.

Let:
PP = Purchase price
SP = Selling price
AD = Accumulated depreciation (the sum of all depreciation recorded over the asset's life)
PP - AD = NBV on the owner's books

The statements made on KBB reflect the following: NBV - SP = Gain/loss on sale or PP - AD - SP = Gain/loss on sale.

I didn't write ever that the gain or loss one realizes is unaffected by depreciation. I wrote that the difference between the purchase price and selling price is not depreciation expense. The decline what an item is worth (recorded at) in the books of its owner is attributable to depreciation (assuming no impairment occurred). The decline in the open market value (worth) of an asset is attributable to a number of things, but depreciation (which is only ever recorded on an owner's books) is not among them.

Lastly, what the KBB use of "depreciation" does is misdescribe a concept that is widely by the general public misconstrued, misapplied and misused. Moreover, you'll notice that KBB does not tell you how to calculate the loss in value, they don't indicate how "worth" is determined and they identify in their "full definition" what "economic factors and historical data" pertain to. So even if the use the term "depreciation," given the ambiguity and vagueness of how they explain it, what makes them a "credible source" with regard to the use of the term in your mind?

Quote:
Originally Posted by csu87 View Post
None of that in here. If you don't believe everything Tony says, you are wrong no matter what
You clearly haven't read enough of my posts. There are multiple examples of my having been wrong. When I am wrong, I admit it and move on. I don't persist in standing my ground simply because I think I'm right. You need only use the search feature to find them.

The thing is that I don't typically cite facts that I am not certain are factually true. When I do write things that I'm not entirely certain about, I let my reader know that is the case. I do so by using words like "ostensibly," "perhaps," "possibly" or "arguably," or I use phrases such as "as far as I know" "to the best of my understanding," and "I believe."

All the best
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      08-12-2015, 12:12 PM   #109
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Quote:
Originally Posted by tony20009
Quote:
Originally Posted by rad doc View Post
http://www.kbb.com/new-cars/total-co...49976359680300

Kbb, a credible source on used car sales. See red circle "depreciation". Obviously different than the accounting usage of the word but nonetheless not an inaccurate way to describe the loss of value. Certainly, it communicates a concept we all understand.
I'm not saying that sources that are credible about car values don't use the term. They do use it. What I'm saying is that they misuse it. They use the term because it's a relatively straight forward thing to calculate and because the word itself is the linguistic opposite of "appreciate." It's also not that cars don't depreciate in one's book of record; they do. It's that what depreciation is and what is most often described as depreciation in connection with a car aren't the same things and the latter is not what depreciation is, but it is a decline in market value or market prices. The key distinction is that depreciation is driven by internal business decisions asset owners make, and a drop in market value is driven by, well, the market, that is buyers and sellers.

Let:
PP = Purchase price
SP = Selling price
AD = Accumulated depreciation (the sum of all depreciation recorded over the asset's life)
PP - AD = NBV on the owner's books

The statements made on KBB reflect the following: NBV - SP = Gain/loss on sale or PP - AD - SP = Gain/loss on sale.

I didn't write ever that the gain or loss one realizes is unaffected by depreciation. I wrote that the difference between the purchase price and selling price is not depreciation expense. The decline what an item is worth (recorded at) in the books of its owner is attributable to depreciation (assuming no impairment occurred). The decline in the open market value (worth) of an asset is attributable to a number of things, but depreciation (which is only ever recorded on an owner's books) is not among them.

Lastly, what the KBB use of "depreciation" does is misdescribe a concept that is widely by the general public misconstrued, misapplied and misused. Moreover, you'll notice that KBB does not tell you how to calculate the loss in value, they don't indicate how "worth" is determined and they identify in their "full definition" what "economic factors and historical data" pertain to. So even if the use the term "depreciation," given the ambiguity and vagueness of how they explain it, what makes them a "credible source" with regard to the use of the term in your mind?

Quote:
Originally Posted by csu87 View Post
None of that in here. If you don't believe everything Tony says, you are wrong no matter what
You clearly haven't read enough of my posts. There are multiple examples of my having been wrong. When I am wrong, I admit it and move on. I don't persist in standing my ground simply because I think I'm right. You need only use the search feature to find them.

The thing is that I don't typically cite facts that I am not certain are factually true. When I do write things that I'm not entirely certain about, I let my reader know that is the case. I do so by using words like "ostensibly," "perhaps," "possibly" or "arguably," or I use phrases such as "as far as I know" "to the best of my understanding," and "I believe."

All the best
So far what I know about you is: you are really proud of your speed reading ability, you don't know S@&$ about Porsche, have a background in finance/accounting and that prevents you from using a term in a generally acceptable albeit perhaps lay manner.
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      08-12-2015, 01:41 PM   #110
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Quote:
Originally Posted by tony20009 View Post
I'm not saying that sources that are credible about car values don't use the term. They do use it. What I'm saying is that they misuse it. They use the term because it's a relatively straight forward thing to calculate and because the word itself is the linguistic opposite of "appreciate." It's also not that cars don't depreciate in one's book of record; they do. It's that what depreciation is and what is most often described as depreciation in connection with a car aren't the same things and the latter is not what depreciation is, but it is a decline in market value or market prices. The key distinction is that depreciation is driven by internal business decisions asset owners make, and a drop in market value is driven by, well, the market, that is buyers and sellers.

Let:
PP = Purchase price
SP = Selling price
AD = Accumulated depreciation (the sum of all depreciation recorded over the asset's life)
PP - AD = NBV on the owner's books

The statements made on KBB reflect the following: NBV - SP = Gain/loss on sale or PP - AD - SP = Gain/loss on sale.

I didn't write ever that the gain or loss one realizes is unaffected by depreciation. I wrote that the difference between the purchase price and selling price is not depreciation expense. The decline what an item is worth (recorded at) in the books of its owner is attributable to depreciation (assuming no impairment occurred). The decline in the open market value (worth) of an asset is attributable to a number of things, but depreciation (which is only ever recorded on an owner's books) is not among them.

Lastly, what the KBB use of "depreciation" does is misdescribe a concept that is widely by the general public misconstrued, misapplied and misused. Moreover, you'll notice that KBB does not tell you how to calculate the loss in value, they don't indicate how "worth" is determined and they identify in their "full definition" what "economic factors and historical data" pertain to. So even if the use the term "depreciation," given the ambiguity and vagueness of how they explain it, what makes them a "credible source" with regard to the use of the term in your mind?



You clearly haven't read enough of my posts. There are multiple examples of my having been wrong. When I am wrong, I admit it and move on. I don't persist in standing my ground simply because I think I'm right. You need only use the search feature to find them.

The thing is that I don't typically cite facts that I am not certain are factually true. When I do write things that I'm not entirely certain about, I let my reader know that is the case. I do so by using words like "ostensibly," "perhaps," "possibly" or "arguably," or I use phrases such as "as far as I know" "to the best of my understanding," and "I believe."

All the best
O I got it, the entire public uses the word "Depreciate" incorrectly but you use it correctly. Got it. What else does the public use incorrectly o wise one?

Ive been in several threads where no matter what, if someone posts something that is against your viewpoint, you go out of your way to try and prove them wrong looking at only sources that support your view and not looking at the entire issue. Yes, I can go by your use of depreciation and only use accounting sources and say that is the only way to use depreciation, or I can use all sources available and see that there are multiple uses for depreciation. Similar to douche bag ie, That woman used a douche bag, or Tony is a douche bag
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