Amortization:

Three methods are used widely in Canada for computing amortization:

Straight - line

Units - of - production

Declining - balance

Cost of car.................................. $80,000.00

Estimated residual value.................. 5,000.00

Amortizable cost........................... $75,000.00

Estimated useful life

Years............................................. 5 years

Unit of production......................... 400,000 units (kilometres)

Straight-Line Method: The straight-line method allocates an equal amount of amortization to each year of asset use.

Amortizable cost is divided by useful life in years to determine annual amortization.