mba会计教材chap09~1

Click to edit Master title style,Click to edit Master text styles,Second Level,?The McGraw-Hill Companies, Inc., 1999,Slide,9-,77,Irwin/McGraw-Hill,Chapter 9,Plant Assets and Depreciation,Plant Assets,Long-lived assets acquired for use in business operations.,Similar to long-term prepaid expenses,The cost of plant assets is the,advance purchase,of services.,As years pass, and the services are used, the cost is transferred to,depreciation expense,.,Major Categories of Plant Assets,Accountable Events,Acquisition.,Allocation of the acquisition cost to expense over the asset抯 useful life (depreciation).,Sale or disposal.,Acquisition of Plant Assets,Asset price,Reasonable and necessary costs . . .,. . . for getting the asset to the desired location.,. . . for getting the asset ready for use.,Cost,Determining Cost,Example,On May 4, Heat Co., an Ohio maker of stoves, buys a new machine from a Texas company. The new machine has a price of $52,000. Sales tax was computed at 8%.,Heat Co. pays $500 shipping cost to get the machine to Ohio. After the machine arrives, set-up costs of $1,300 are incurred, along with $4,000 in testing costs.,Compute the cost of Heat Co.s new machine.,Determining Cost,Example,Prepare the journal entry.,Determining Cost,Example,Special Considerations,Improvements to land such as driveways, fences, and landscaping are recorded separately.,Land Improvements,Cost includes real estate commissions, escrow fees, legal fees, clearing and grading the property.,Land,Special Considerations,Repairs made prior to the building being put in use are considered part of the building抯 cost.,Buildings,Special Considerations,Equipment,Related interest, insurance, and property taxes are treated as expenses of the current period.,Special Considerations,I think I抣l buy the whole thing; barn, land, and animals.,Allocation of a Lump-Sum Purchase,Special Considerations,The total cost must be allocated to separate accounts for each asset.,The allocation is based on the relative,Fair Market Value,of each asset purchased.,Allocation of a Lump-Sum Purchase,Capital Expenditures and Revenue Expenditures,Depreciation,The allocation of the cost of a plant asset to expense in the periods in which services are received from the asset.,Cost of plant assets,Balance Sheet,Assets:,Plant and,equipment,Income Statement,Revenues:,Expenses:,Depreciation,as the services are received,Book Value,Cost - Accumulated Depreciation,Accumulated Depreciation,Contra-asset,Represents the portion of an asset抯 cost that has already been allocated to expense.,Causes of Depreciation,Physical deterioration,Obsolescence,Depreciation,Cost - Residual ValueLife in Years,Depreciation,Expense per Year,=,Straight-Line Depreciation,Straight-Line Method,Example,On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years.,Compute depreciation for 1998 using the straight-line method.,Straight-Line Method,Example,On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years.,Compute depreciation for 1998 using the straight-line method.,Straight-Line Method,Example,Bass Co. will record $4,200 depreciation each year for five years. Total depreciation over the estimated useful life of the boat is:,Salvage Value,Straight-Line Method,Graph of Depreciation Expense,Depreciation for Fractional Periods,When an asset is acquired during the year, depreciation in the year of acquisition must be prorated.,Half-Year Convention,In the year of acquisition, record six months of depreciation.,Using the half-year convention, calculate the straight-line depreciation on December 31, 1999, for equipment purchased in 1999. The equipment cost $75,000, has a useful life of 10 years and an estimated salvage value of $5,000.,Half-Year Convention,Example,Depreciation= ($75,000 - $5,000) ?10,= $7,000 for a full year,Depreciation = $7,000 ?,1,/,2,= $3,500,Using the half-year convention, calculate the straight-line depreciation on December 31, 1999, for equipment purchased in 1999. The equipment cost $75,000, has a useful life of 10 years and an estimated salvage value of $5,000.,Half-Year Convention,Example,Declining-Balance Method,Depreciation in the early years of an assets estimated useful life is higher than in later years.,The double-declining balance accelerated depreciation rate is 200% of the straight-line depreciation rate of 1/Useful Life.,Double-Declining Balance,Example,On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years.,Compute depreciation for 1998 using the double-declining balance method.,Double-Declining Balance,Example,On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years.,Compute depreciation for 1998 using the double-declining balance method.,Double-Declining Balance,Example,Compute depreciation for the rest of the boat抯 estimated useful life.,Double-Declining Balance,Example,Total depreciation over the estimated useful life of an asset is the same using either the,straight-line method,or the,declining-balance method,.,Double-Declining Balance,Graph of Depreciation Expense,Depreciation Methods in Use for Financial Reporting,MACRS: The Tax Method,MACRS =,M,odified,A,ccelerated,C,ost,R,ecovery,S,ystem,Based on Declining-Balance Methods,The only accelerated method allowed by the IRS when computing depreciation for tax return purposes.,Asset Cost ? MACRS rate,Rates are available from tables provided by the IRS.,Other Issues,Estimates of Useful Life and Residual Value,May differ from company to company.,The reasonableness of management抯 estimates is evaluated by external auditors.,Principle of Consistency,Companies should avoid switching depreciation methods from period to period.,Revising Depreciation Rates,So depreciationis an,estimate,.,Predicted,salvage value,Predicted,useful life,Over the life of an asset, new information may come to light that indicates theoriginal estimates need to be revised.,On January 1,1998, equipment was purchased that cost $30,000, has a useful life of 10 years and no salvage value. During,2001, the useful life was revised to 8 years total (5 years remaining).,Calculate depreciation expense for the year ended December 31, 2001, using the straight-line method.,Revising Depreciation Rates,Example,Revising Depreciation Rates,Example,Book value at date of change,Salvage value at date of change,Remaining useful life at date of change,When our estimates change, depreciation is:,Revising Depreciation Rates,Example,When our estimates change, depreciation is:,Book value at date of change,Salvage value at date of change,Remaining useful life at date of change,Impairment of Assets,If the cost of an asset cannot be recovered through future use or sale, the asset should be,written down,to its net realizable value.,Time to move on to a new topic.,Update depreciation to the date of disposal.,Recording cashreceived (debit),or paid (credit).,Removing accumulateddepreciation (debit).,Journalize disposal by:,Removing the asset cost (credit).,Recording again (credit),or loss (debit).,Disposal of Plant and Equipment,If Cash BV, record a gain (credit).,If Cash BV, record a loss (debit).,If Cash = BV, no gain or loss.,Disposal of Plant and Equipment,Recording cashreceived (debit),or paid (credit).,Removing accumulateddepreciation (debit).,Removing the asset cost (credit).,Recording again (credit),or loss (debit).,On September 30, 1999, Evans Map Company sells a machine that originally cost $100,000 for $60,000 cash. The machine was placed in service on January 1, 1994. It has been depreciated using the straight-line method with an estimated salvage value of $20,000 and an estimated useful life of 10 years.,Let抯 answer the following questions.,Disposal of Plant and Equipment,Example,The amount of depreciation recorded on September 30, 1999,to bring depreciation up to date is:,a.$8,000.,b.$6,000.,c.$4,000.,d.$2,000.,Disposal of Plant and Equipment,Example,The amount of depreciation recorded on September 30, 1999,to bring depreciation up to date is:,a.$8,000.,b.$6,000,.,c.$4,000.,d.$2,000,.,Annual Depreciation:,($100,000 - $20,000) 10 Yrs. = $8,000,Depreciation to Sept. 30:,9/12,$8,000 = $6,000,Disposal of Plant and Equipment,Example,After updating the depreciation, the machines book value on September 30, 1999, is:,a.$54,000.,b.$46,000.,c.$40,000.,d.$60,000.,Disposal of Plant and Equipment,Example,After updating the depreciation, the machines book value on September 30, 1999, is:,a.$54,000.,b.$46,000.,c.$40,000.,d.$60,000.,Disposal of Plant and Equipment,Example,Disposal of Plant and Equipment,Example,The machines sale resulted in:,a.a gain of $6,000.,b.a gain of $4,000.,c.a loss of $6,000.,d.a loss of $4,000.,The machines sale resulted in:,a.a gain of $6,000.,b.a gain of $4,000.,c.a loss of $6,000.,d.a loss of $4,000,.,Disposal of Plant and Equipment,Example,Trading in Used Assets on New,Accounting depends on whetherassets are,similar,or,dissimilar,.,AirplaneforAirplane,TruckforAirplane,Only situations where cash is paid will be demonstrated.,Trading in Used Assets on New,On May 30, 1999, Essex Company exchanged a used airplane and $35,000 cash for a new airplane. The old airplane originally cost $40,000, had up-to-date accumulated depreciation of $30,000, and a fair value of $4,000.,SIMILAR,Trading in Used Assets on New,Similar Exchange Example,The exchange resulted in a:,a.gain of $6,000.,b.loss of $6,000.,c.loss of $4,000.,d. gain of $4,000.,Trading in Used Assets on New,Similar Exchange Example,The exchange resulted in a:,a.gain of $6,000.,b.loss of $6,000.,c.loss of $4,000.,d. gain of $4,000.,Prepare a journal entry to record the exchange.,Trading in Used Assets on New,Similar Exchange Example,Trading in Used Assets on New,Similar Exchange Example,Lets change the subject!,Intangible Assets,Noncurrent assetswithout physicalsubstance.,Useful life isoften difficultto determine.,Usually acquired for operational use.,Characteristics,Often provideexclusive rightsor privileges.,Patents,Copyrights,Leaseholds,Leasehold Improvements,Goodwill,Trademarks and Trade Names,Record at current cash equivalent cost, including purchase price, legal fees, and filing fees,.,Intangible Assets,Amortize over shorter of economic life or legal life, subject to a maximum of 40 years.,Use straight-line method.,Research and development costs are normally expensed as incurred.,Intangible Assets,Occurs when onecompany buysanother company.,The amount by which thepurchase price exceeds the fairmarket value of net assets acquired.,Goodwill,Only purchased goodwill is an intangible asset.,Goodwill,Goodwill,Example,Eddy Company paid $1,000,000 to purchase all of James Companys assets and assumed liabilities of $200,000. The acquired assets were appraised at a fair value of $900,000,.,What amount of goodwill should be recorded on Eddy Company books?,a.$100,000.,b.$200,000.,c.$300,000.,d.$400,000.,Goodwill,Example,What amount of goodwill should be recorded on Eddy Company books?,a.$100,000.,b.$200,000.,c.$300,000.,d.$400,000.,Goodwill,Example,Intangible Assets,Patents,Exclusive right grantedby federal government to sell or manufacture an invention.,Cost is purchaseprice plus legalcost to defend.,Amortize costover the shorter ofuseful life or 17 years.,A symbol, design, or logo associated with a business.,Purchasedtrademarksare recordedat cost, andamortized overshorter of legalor economic life,or 40 years.,Internallydevelopedtrademarkshave norecordedasset cost.,Intangible Assets,Trademarks and Trade Names,Legally protected right to sell products or provide services purchased by franchisee from franchisor.,Purchase price is intangible asset which is amortized over the shorter of the protected right or 40 years.,Intangible Assets,Franchises,Intangible Assets,Copyrights,Exclusive right granted by the federal government to protect artistic or intellectual properties.,Amortize costover a period notto exceed 40 years.,Legal life islife of creatorplus 50 years.,Lets Change the Subject Again!,Total cost,including exploration anddevelopment,is charged todepletion expenseover periodsbenefited.,Natural Resources,Examples: oil, coal, gold,Extracted fromthe naturalenvironmentand reportedat cost lessaccumulateddepletion.,Depletion of Natural Resources,Depletion is calculated using the,units-of-production method.,Unit depletion rate,is calculated as follows:,Total Units of Capacity,Cost Salvage Value,Total depletion cost for a period is:,Unit Depletion,Rate,Number of Units,Extracted in Period,Depletion of Natural Resources,Totaldepletioncost,Inventoryfor sale,UnsoldInventory,Cost ofgoods sold,ABC Mining acquired a tract of land containing ore deposits. Total costs of acquisition and development were $1,000,000 and ABC estimated the land contained 40,000 tons of ore.,Depletion of Natural Resources,Example,Depletion of Natural Resources,Example,What is ABCs depletion rate?,a.$40 per ton.,b.$50 per ton.,c.$25 per ton.,d.$20 per ton.,What is ABCs depletion rate?,a.$40 per ton.,b.$50 per ton.,c.$25 per ton.,d.$20 per ton.,Cost ?Units,$1,000,000 40,000 Tons,= $25 Per Ton,Depletion of Natural Resources,Example,For the year ABC mined and sold 13,000 tons. What is the total depletion cost for the year?,a.$300,000.,b.$325,000.,c.$225,000.,d.$275,000.,Depletion of Natural Resources,Example,For the year ABC mined and sold 13,000 tons. What is the total depletion cost for the year?,a.$300,000.,b.$325,000.,c.$225,000.,d.$275,000.,Depletion cost = 13,000 x $25,= $325,000,Depletion of Natural Resources,Example,Specialized plant assets may be required to extract the natural resource.,These assets are recorded in a separate account and depreciated.,Depletion of Natural Resources,End of Chapter 9,