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?