ACC 113 Summary

ACC 113 Summary - Chapter (10) Plant Assets. Natural...

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Chapter (10) Plant Assets. Natural Resources, And Intangible Assets Plant Assets (property, plant and equipment or fixed assets) are tangible resources that used in the operation of business and are not intended for sale Plant assets are recorded at cost which consist of all expenditure necessary to acquire the assets and make if ready for its intended use Examples Land cost include : cash purchase price, closing cost such as title and attorney’s fees, real estate brokers’ commission, and accrued property tax Buildings cost include : cash purchase price, closing cost such as title and attorney’s fees, real estate brokers’ commission, and accrued property tax and remodeling or repairing Equipment include : cash price, sales tax, fright charges, and insurance during transit period by the purchaser, expenditure to assemble, install and test the equipment. Exercise: Delivery truck is purchase for $15000 cash, plus sales tax of $900 and delivery costs to the dealer of $500. The buyer also pays $200 for painting, $600 for annual insurance, and $80 for a motor vehicle license. What is the cost of the delivery truck? a) $15900 b) $16400 c) $16600 d) $17280 DEPRECIATION Allocation of the cost of a plant asset over its useful life in a rational and systematic manner. Factors in computing depreciation 1. Cost 2. Useful life 3. Salvage value (residual value) Depreciation methods 1. Straight-line 2. Units-of-activity 3. Declining-balance www.uobtimes.com ACC113 1
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Example (this example will be used for the three methods) Small delivery truck purchase by Barb’s florists on January 1. 2002 Cost $13000 Expected salvage value $1000 Estimated useful life in years 5 Estimated useful life in miles 1000000 1-STRAIGHT-LINE (Depreciation is same each year) FORMULA: DEPRECIABLE COST / USEFUL LIFE IN YEARS Year Depreciable cost Depreciation rate Annual depreciation expenses Accumulated depreciation Book value Notes: www.uobtimes.com ACC113 2
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2- UNIT-OF-ACTIVITY Useful life expressed in terms of the total units of production or use expected form the assets, depreciation will be effected by the use of the assets FORMULA: DEPRECIATION COST PER UNIT X UNITS OF ACTIVITY DURING THE YEAR Year Unit of activity Depreciation cost/unit Annual depreciation expenses Accumulated depreciation Book value Notes: www.uobtimes.com ACC113 3
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3 – DECLINING-BALANCE Declining annul depreciation expenses over the assets life FORMULA: BOOK VALUE AT THE BEGINNING OF THE YEAR X DECLINING BALANCE RATE Year Book value beginning of year Depreciation rate Annual depreciation expenses Accumulated depreciation Book value Notes: www.uobtimes.com ACC113 4
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REVISING PERIODIC DEPRECIATION Change in estimated useful life of the assets. The change is made in the current and future years only; it is not made to prior periods or years.
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ACC 113 Summary - Chapter (10) Plant Assets. Natural...

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