Kế toán, kiểm toán - Chapter 16: Recording and evaluating capital resource process activities: investing

Chapter 16Recording and Evaluating Capital Resource Process Activities: InvestingCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinThree Things to Remember Regarding Long-term AssetsRecord an asset at it’s initial cost.Report the asset at it’s carrying value.Recognize gains/losses when assets are discarded, exchanged (two exceptions), or sold.16-*16-*What is the Cost of Property, Plant, and Equipment?PPE is recorded as the total amount required to obtain and get the asset ready for its intended usePurchase priceCosts incurred to obtain (freight, etc.)Cost incurred to setup (installation, etc.)16-*What are the Factors Affecting Depreciation Calculations?CostUseful lifeSalvage valueDepreciation method16-*How is Depreciation Expense Calculated Using the Different Methods?Straight-line(Cost – salvage value)/Useful life (time) = annual depreciation expenseUnits-of-production(Cost – salvage value)/Useful life (units) = depreciation rateDepreciation rate * annual usage = annual depreciation expense16-*Depreciation Expense Calculated Using the Different Methods ContinuedDouble-declining balance2 * straight-line rate = DDB rateDDB * carrying value = annual depreciation expense16-*What is the Company Doesn’t Purchase (or sell) the Asset at the Beginning (or end) of the Year?Units-of-productionMultiple the depreciation rate by the actual usageStraight-line or double-declining balanceUse the mid-year convention or count the time that the asset was in use16-*How Can a Company Dispose of an Asset Before its Useful Life is Over?DiscardSellExchangeTrade-in16-*What is the Process Involved in Asset Disposals?Record depreciation to date of disposalRemove the cost of the asset and the accumulated depreciation from the records Record the assets received if applicableRecord the cash paid if applicableRecord the loss incurred if applicableRecord the gain if applicable 16-*Exchange ExampleWe have a computer that originally cost $6,000 and has accumulated depreciation of $4,500. We will trade-in this computer for a new computer with a list price of $10,000. The computer company will give us a trade-in allowance of $2,000.Book value = $6,000 - $4,500 = $1,500.Cash payment required = $10,000 - $2,000 = $8,00016-*Trade-in Example ContinuedComputer received = $10,000Less assets given up = $9,500Gain = $500 Entry: Computer (new) 10,000 Accumulated depreciation 4,500 Computer (old) 6,000 Cash 8,000 Gain 50016-*What are Depletion and Amortization?DepletionThe cost of a natural resource is allocated to expenseTypically, units-of-production method usedAmortizationThe cost of an intangible asset is allocated to expenseTypically, straight-line method is usedWhat are Nonoperational Investments?Debt securitiesTradingAvailable-for-saleHeld-to-maturityEquity securities (50%)--consolidation16-*