Chapter 10
Selling Fixed Asset
Depreciation Expense - Equipment as a Debit, Accumulated Depreciation as Credit
Discards Fixed Asset
- Accumulated Depreciation - Equipment Debit, Equipment is Credit - Depreciation Expense - Equipment Debit, Accumulated Depreciation - Equipment as Credit
Straight-line Method
A method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset.
Double-declining-balance method
A method of depreciation that provides periodic depreciation expense based on the declining book value of a fixed asset over its estimated life.
Revised Depreciation Expense Amounts
Book Value - Residual Value / Useful Life Years
Know what types of costs should be included in the total cost of acquiring a fixed asset
Building, Machinery & Equipment, Land, Land Improvements, Costs included in Expense.
Depreciated
Buildings, Equipment, Office furniture, Vehicles, Land, Machinery
Loss
Cash Accumulated Depreciation - Equipment Loss on Sale of Equipment as Debit Equipment as Credit
Gain
Cash Accumulated Depreciation - Equipment as Debit Equipment Gain on Sale of Equipment as Credit.
No Gain or Lost
Cash Accumulated Depreciation - Equipment as Debits Equipment as Credit
Revenue expenditures
Costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets.
Revenue Expenditures:
Costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets. Example: Extraordinary Repairs
Patents
Exclusive rights to produce and sell goods with one or more unique features.
Functional Depreciation
Factors include obsolescence in customer needs that cause the asset to no longer provide services for which it was intended.
Physical depreciation
Factors include wear and tear during use or from exposure to weather.
Residual Value
Fixed asset at the end of its useful life is estimated at the time the asset is placed into service. Synonyms: Scrap Value, Salvage Value, or trade-in Value
Expected Useful Life
Fixed asset is estimated at the time the asset is placed into service.
Intangible Asset
Long-term assets that are useful in the operation of a business, not held for sale, and are without physical quantities.
Depleted
Natural Resources
Amortized
Patents, Copyrights, Trademarks
Know the two factors as to why we depreciate fixed assets
Physical depreciation and functional Depreciation
Know how the assets are presented on the balance sheet:
Property, plant, equipment, and intangible assets
Boot
The amount a buyer owes a seller when a fixed asset is traded in on a similar asset
Book Value
The cost of a fixed asset minus accumulated depreciation on the asset.
Capital Expenditures:
The costs of acquiring fixed assets, adding to a fixed asset, improving a fixed asserts, or extending a fixed assets useful life. Example: Ordinary Maintenance and Repairs, and Asset Improvements
Depreciable Cost
The difference between a fixed asset's initial cost and its residual value is called the asset's. Calculate: Cost - Residual Value = BLANK
Residual Value
The estimated value of a fixed asset at the end of its useful life.
Amortization
The periodic transfer of the cost of an intangible ass to expense.
Depletion
The process of transferring the cost of natural resources to an expense account. Cost of Resource/ Estimated total units of resource = BLANK
Depreciation
The systematic periodic transfer of the cost of fixed asset to an expense account during its expected useful life.