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.