Accounting Chapter 18

An application of Matching expenses with Revenue

A portion of the plant asset's cost is transferred to an expense account each fiscal period throughout a plant asset's useful life

Personal Property

All property not classified as real property

plant asset record

An accounting form on which a business records information about each plant asset.

Depreciation Expense - Debit Accumulated Depreciation - Credit

An asset is sold in the middle of the year. You need to record the partial depreciation. What is the entry?

Current asset

Anything used within a years time

Loss on plant asset

Classified as an Other Expense with a normal debit balance

Depreciation

Decrease in value because of the use or the passing of time

Loss on plant assets

The loss that results when a plant asset is sold for less than book value

Personal Property Examples

Jewelry, clothing

Real property

Land and anything attached to the land sometimes referred as real estate

Double Declining Balance

Multiplying the book value by a constant depreciation rate a the end of each fiscal period. 100% / years * 2

Declining balance method of depreciation

Multiplying the book value by a constant depreciation rate at the end of each fiscal period

Salvage value

Original cost- ___________= total depreciation

Book value

Original cost- accumulated depreciation =

straight line depreciation

Original cost- estimated salvage value = Total Depreciation divided by estimated useful life = annual depreciation.

Plant asset examples

Printer, computer, cash register

Determination of Estimated Useful Life

Prior year's experience and trade association guidelines

Historical cost

Recording a plant asset for the amount paid for asset is an application for which accounting concept

Gain on plant assets

Revenue that results when a plant asset is sold for more than book value

Assessed value

Value of an asset determined by tax authorities for the purpose of calculating taxes

$2,000

What is the book value if an asset costs $3,000 and has accumulated depreciation of $1,000?

When does a business usually remove a plant asset from its business and dispose of it

When it no longer works or is no longer useful

Break even

When there is no loss or gain on the plant asset. Sold for its book value.

record the expense for the time that the asset is used to earn revenue

Why do we record depreciation expense?

Accumulated Depreciation

the total depreciation of the plant asset classified as a contra asset account

matching expenses with revenue

transferring a part of the plant asset's cost to an expense in the year that the asset is used to earn revenue is what concept?