1 / 64

Operational Assets: Utilization and Disposition

Cost Allocation

abrienda
Télécharger la présentation

Operational Assets: Utilization and Disposition

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

    1. Operational Assets: Utilization and Disposition CHAPTER 11

    2. Cost Allocation An Overview

    3. Cost Allocation An Overview

    4. Measuring Cost Allocation

    5. Time-based methods Straight-line (SL). Accelerated methods Sum-of-the-years-digits (SYD). Declining balance. Activity-based methods Units-of-production method (UOP). Group and composite methods Tax depreciation Depreciation of Operational Assets

    6. Depreciation on the Balance Sheet

    7. Straight-Line (SL)

    8. Straight-Line Example On January 1, we purchase equipment for $50,000 cash. The equipment has an estimated service life of 5 years and residual value of $5,000. What is the annual straight-line depreciation?

    9. Straight-Line Example

    10. Straight-Line Example

    11. Straight-Line Example

    12. Accelerated methods result in more depreciation expense in the early years of an assets useful life and less depreciation expense in later years of an assets useful life. Accelerated Methods

    13. Sum-of-the-Years Digits (SYD)

    14. On January 1, we purchase equipment for $50,000 cash. The equipment has a service life of 5 years and an estimated residual value of $5,000. Using SYD, compute depreciation expense for the first two years. Sum-of-the-Years Digits Example

    15. Sum-of-the-Years Digits Example

    16. Sum-of-the-Years Digits Example

    17. Sum-of-the-Years Digits Example

    18. Comparison of Methods: Sum-of-the-Years Digits Method

    19. Declining-Balance Methods Declining-balance depreciation is based on the straight-line rate multiplied by an acceleration factor. Declining-balance depreciation computations initially ignore residual value.

    20. Double-Declining-Balance (DDB)

    21. Double-Declining-Balance Example On January 1, we purchase equipment for $50,000 cash. The equipment has a service life of 5 years and an estimated residual value of $5,000. What is depreciation expense for the first two years using double-declining-balance?

    22. Double-Declining-Balance Example

    23. Double-Declining-Balance Example

    24. Comparison of Methods: Double-Declining-Balance Method

    25. Activity-Based Depreciation Depreciation can also be based on measures of input or output like: Service hours, or Units-of-Production) Depreciation is not taken for idle assets.

    26. Units-of-Production

    27. Units-of-Production Example On January 1, we purchased equipment for $50,000 cash. The equipment is expected to produce 100,000 units during its life and has an estimated residual value of $5,000. If 22,000 units were produced this year, what is the amount of depreciation expense?

    28. Units-of-Production Example

    29. Depreciation Disclosures Depreciation expense. Balances of major classes of depreciable assets. Accumulated depreciation by asset or in total. General description of depreciation methods used.

    30. Assets are grouped by common characteristics. A composite rate is calculated. Annual depreciation is determined by: the composite rate the total group acquisition cost. Accumulated depreciation records are not maintained for individual assets. Group and Composite Methods

    31. Apply the composite rate to the total cost of the assets. If assets in the group are sold, or new assets added, the composite rate remains the same. When an asset in the group is sold or retired, debit Accumulated Depreciation for the difference between the assets cost and the proceeds. Group and Composite Methods

    32. Depletion of Natural Resources

    33. Depletion of Natural Resources

    34. Depletion of Natural Resources Example

    35. Depletion of Natural Resources Example

    36. Depletion of Natural Resources Example

    37. Amortization of Intangible Assets

    38. Amortization of Intangible Assets

    39. Torch, Inc. has developed a new device. Patent registration costs consisted of $2,000 in attorney fees and $1,000 in federal registration fees. The device has a useful life of 5 years. The legal life is 17 years. At the end of year 1, what is Torchs amortization expense? Amortization of Intangibles Patent Example

    40. Amortization of Intangibles Patent Example

    41. Amortization of Intangibles Patent Example

    42. Partial-Period Depreciation

    43. Partial-Period Depreciation

    44. Changes in Estimates

    45. Changes in Estimates Example

    46. Changes in Estimates Example

    47. Change in Depreciation Method

    48. During the fourth year of an assets life, XYZ, Inc. made a change from the double- declining balance to the straight-line method. The following schedule shows the effect of this change. Change in Depreciation Method Example

    49. Change in Depreciation Method Example

    50. Error Corrections

    51. Tax Depreciation

    52. Impairment of Value SFAS No. 121 Occasionally, asset value must be written down due to permanent loss of utility of an asset through . . . Casualty. Obsolescence. Lack of demand for the assets services.

    53. An asset is impaired if . . . Impairment of Value SFAS No. 121

    54. Impairment of Value SFAS No. 121

    55. Impairment of Value Example

    56. Expenditures Subsequent to Acquisition

    57. Expenditures Subsequent to Acquisition

    58. Expenditures Subsequent to Acquisition

    59. Expenditures Subsequent to Acquisition

    60. Expenditures Subsequent to Acquisition

    61. Disposition of Operational Assets Update depreciation to date of disposal. Remove original cost of asset and accumulated depreciation from the books. The difference between BV of the asset and the amount received is recorded as a gain or loss.

    62. Disposition of Operational Assets - Example On June 30, 1999, MeLo, Inc. sold equipment for $6,350 cash. The equipment was purchased on January 1, 1994 at a cost of $15,000. The asset had a useful life of 10 years and no salvage value. MeLo last recorded depreciation on the equipment on December 31, 1998, its year-end. Prepare the journal entries necessary to record the disposal of this equipment.

    63. Disposition of Operational Assets - Example

    64. Disposition of Operational Assets - Example Remove original cost of asset and accumulated depreciation from the books. Record the gain or loss.

    65. End of Chapter 11

More Related