Example of Office Furniture and Depreciation

NOTE 17 - OFFICE FURNITURE & ACCESSORIES

The Company has budgeting a variety of purchases for Office Furniture & Accessories throughout its forecasted period. The following budget is allotted to this asset account.

  START-UP
PHASE
YEAR 1 YEAR 2 YEAR 3
 
Office Furniture Purchase Budget/Year $1,412 $3,031 $4,531 $6,531

 

The above furniture is estimated to have a useful life of five (5) years and a salvage value of Zero. The furniture is depreciation over its useful life using the straight line depreciation method. The yearly depreciation expenses are as follows;

  YEAR 1 YEAR 2 YEAR 3
 
Depreciation Expense - Furniture $606 $906 $1,306

 

On the Company's forecasted balance sheet an account called Net Office Furniture can be viewed. This account considers depreciation expenses to estimate the current market value of the office furniture at the end of each fiscal year. Below provides the calculation used in determining the Net Office Furniture account balances.

  START-UP
PHASE
YEAR 1 YEAR 2 YEAR 3
 
Office Furniture $ 1,412 $ 3,031 $ 4,531 $ 6,531
Accumulated Depreciation - Furniture $ 0 $ 606 $ 1,512 $ 2,818
Net Office Furniture $ 1,412 $ 2,425 $ 3,018 $ 3,712