Kế toán, kiểm toán - Chapter 18: Property, Plant, and Equipment

1-*McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Property, Plant, and Equipment Section 1: Acquisition and DepreciationChapter18Section ObjectivesDetermine the amount to record as an asset’s cost.Compute and record depreciation of property, plant, and equipment by commonly used methods.Apply the Modified Accelerated Cost Recovery System (MACRS) classes for federal income tax purposes.Cost of Tangible Personal Property Gross purchase price less discounts Transportation costs Installation costs Costs of adjustments or modifications needed to prepare the asset for useCost of Real Property Purchase price Legal costs Other costs related to the acquisitionLong term assets, like buildings, machinery, equipment, furniture, and fixtures are depreciated because they have a limited life and get used up over time.Depreciation refers to the loss of usefulness, and not necessarily to a decrease in the market value.The account depreciation expense is debited, and the account accumulated depreciation is credited to record the depreciation for a period.DepreciationDepreciation Methods Straight-Line Declining-Balance Sum-of-the-Years’-Digits Units-of-OutputStraight-Line Method Formula: Depreciation = Cost – Salvage Value  Estimated Useful Life The same dollar amount of depreciation is taken  each year as an expense.Declining-Balance MethodThe book value of an asset at the beginning of the year is multiplied by a percentage to determine depreciation for the year.This is an accelerated method of depreciation.This method ignores salvage value.Sum-of-the-Years’-Digits Method This is an accelerated depreciation method. The denominator is sum of the useful life years added together. (If the useful life is 5 years, then denominator is 15 (1+2+3+4+5). The numerator is the number of years remaining in the useful life of  the asset. Year 1: The fraction is 5/15. Year 2: The fraction is 4/15. Year 5: The fraction is 1/15. The fraction is multiplied by the acquisition cost less the net  salvage value.Units-of-Output Method Calculates depreciation at the same rate for each  unit produced. Unit of production can be measured by: Physical quantities of production. Number of hours the asset is used. Other measures.Depreciation for Federal Income Tax Purposes A different set of rules is used for depreciation for  income tax purposes. MACRS = Modified Accelerated Cost Recovery System“Cost Recovery” refers to the amount of depreciation  expense used in computing taxable incomeApply the Modified Accelerated Cost Recovery System (MACRS) for federal income tax purposesObjective 3Adjustments and the Worksheet Section 2: Dispositionof AssetsChapter18Section ObjectivesRecord sales of plant and equipment.5. Record asset trade-ins using financial accounting rules and income tax requirements.Businesses routinely sell or dispose of plant assets that are no longer useful to the business. When assets are disposed of, the business often incurs a gain or loss.Proceeds – Book Value = Gain or lossMethods of DispositionMethods of Disposition Scrapping or discarding Sale Trade-in for a similar assetDisposal by Sale Step 1. Record depreciation to the date of disposition. Step 2. Remove the cost of the asset. Step 3. Remove the accumulated depreciation. Step 4. Record the proceeds. Step 5. Determine and record the gain or loss, if any. Record sales of plant and equipmentObjective 4Disposal by Trade-InStep 1. Record the depreciation up to the date of  trade-in.Step 2. Record the trade-in of the old asset and  the purchase of the new asset. Use either: the financial accounting rules, or the income tax rules. Disposing of Fixed Assets by ExchangeApplying the Financial Accounting Rules if there is a loss on the trade-in: Step 1. Remove the cost of the old asset. Step 2. Remove the accumulated depreciation for the old asset. Step 3. Record the payment. Step 4. Record the new asset at its fair market  value. Step 5. Determine and record the loss.Gain: (Trade in > Book Value of old)Gain not recognized!! New asset’s recorded cost: Book value of old asset + Cash Payment = Recorded cost of new assetLoss: (Trade in < Book Value of old)Recognize loss in Loss on Trade-in of Plant AssetFinancial Accounting RulesIncome Tax Method Step 1. Remove the cost of the old asset. Step 2. Remove the accumulated depreciation for  the old asset. Step 3. Record the payment. Step 4. Determine and record the cost of the new  asset.Gain: Not recognized.A gain simply reduces the new asset’s cost.Loss: Not recognized.A loss simply increases the tax basis (historical cost for tax purposes).Income Tax MethodRecall that conservatism requires that the method that is least likely to overstate income should be used.Income Tax MethodTherefore, under GAAP, a loss must be recorded.However, some argue that the income tax method is acceptable (no loss recorded) if the loss is not material.Property, Plant, and Equipment Section 3: Special Topics in Long-Term Assets Chapter18Section ObjectivesCompute and record depletion of natural resources.Recognize asset impairment and understand the general concepts of accounting for impairment.Compute and record amortization of intangible assets.Depletion matches an asset’s costs with the benefits derived from its use Natural Resources: Iron ore Oil Gold Coal Compute and record depletion of natural resourcesTypes of Depletion Depletion for Financial Statement Purposes Depletion for Federal Income Tax PurposesObjective 6Impairment of Property, Plant, and EquipmentThree steps are used to determine whether an asset is impairedStep 1. Review circumstances that suggest impairment  may have occurredStep 2. Apply the recoverability testStep 3. Compute the amount of the impairmentRecognize asset impairment and understand the general concepts of accounting for impairmentObjective 7Types of Intangible Assets Patent Copyright Franchises Trademarks, trade names,  brand names Computer software GoodwillCompute and record amortization of intangible assetsObjective 8Internal Control of Property, Plant, and EquipmentAuthorize and justify the purchase of assets.Assign identification number to each asset.Maintain an asset register listing.Assign responsibility for safekeeping, maintaining, and operating each asset to a specific person.Take a physical inventory count periodically.Establish procedures to authorize asset retirement, sale, or other disposition.