tailieunhanh - Lecture Financial accounting: Information for decisions (7/e): Chapter 8 - John J. Wild

Chapter 8 - Reporting and analyzing long-term assets. After studying this chapter you will be able to: Explain the cost principle for computing the cost of plant assets; explain depreciation for partial years and changes in estimates; distinguish between revenue and capital expenditures, and account for them. | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 8 Reporting and Analyzing Long-Term Assets Called Property, Plant & Equipment Plant Assets Expected to Benefit Future Periods Actively Used in Operations Tangible in Nature C1 8- Decline in asset value over its useful life Use 2. Allocate cost to periods benefited 3. Account for subsequent expenditures Disposal 4. Record disposal Plant Assets Acquisition 1. Compute cost C1 8- Depreciation is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use. Cost Allocation Acquisition Cost (Amount yet to be depreciated) Balance Sheet (Amount depreciated) Income Statement Expense Depreciation P1 8- Straight-line Units-of-production Declining-balance Depreciation Methods P1 8- Straight-Line Method Cost - Salvage value Useful life Depreciation expense for period = $9,000 Depreciation expense per year = $50,000 - $5,000 5 years = P1 8- Units-of-Production Method Step 2: Depreciation Expense = Depreciation Per Unit × Number of Units Produced in the Period Depreciation Per Unit = Cost - Salvage Value Total Units of Production Step 1: P1 8- Double-Declining-Balance Method Step 2: Double-declining- balance rate = 2 × Straight-line rate = 2 × 20% = 40% Step 1: Straight-line rate = 100 % ÷ Useful life = 100% ÷ 5 = 20% Step 3: Depreciation expense = Double-declining- balance rate × Beginning period book value 40% × $50,000 = $20,000 for 2013 P1 8- Recording cash received (debit) or paid (credit) Removing accumulated depreciation (debit) Update depreciation to the date of disposal Journalize disposal by: Removing the asset cost (credit) Recording a gain (credit) or loss (debit) Disposals of Plant Assets P2 8- Natural Resources: Cost Determination and Depletion Step 2: Depletion expense = Depletion per unit × Units extracted and sold in period Depletion per unit = Cost - Salvage value Total units of capacity Step 1: P3 8- Noncurrent assets without physical substance Useful life is often difficult to determine Usually acquired for operational use Intangible Assets Often provide exclusive rights or privileges Intangible Assets P4 8- End of Chapter 8 8- | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 8 Reporting and Analyzing Long-Term Assets Called Property, Plant & Equipment Plant Assets Expected to Benefit Future Periods Actively Used in Operations Tangible in Nature C1 8- Decline in asset value over its useful life Use 2. Allocate cost to periods benefited 3. Account for subsequent expenditures Disposal 4. Record disposal Plant Assets Acquisition 1. Compute cost C1 8- Depreciation is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use. Cost Allocation Acquisition Cost (Amount yet to be depreciated) Balance Sheet (Amount depreciated) Income Statement Expense Depreciation P1 8- Straight-line Units-of-production Declining-balance Depreciation Methods P1 8- Straight-Line .