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Unformatted text preview: chapter 10 Fixed Assets and Intangible Assets ______________________________________________ OPENING COMMENTS Chapter 10 addresses fixed assets, intangible assets, natural resources, and the accounting issues related to these assets. After studying the chapter, your students should be able to: 1. Define, classify, and account for the cost of fixed assets. 2. Compute depreciation, using the following methods: straight-line method, units-of-production method, and double-declining-balance method. 3. Journalize entries for the disposal of fixed assets. 4. Compute depletion and journalize the entry for depletion. 5. Describe the accounting for intangible assets, such as patents, copyrights, and goodwill. 6. Describe how depreciation expense is reported in an income statement and prepare a balance sheet that includes fixed assets and intangible assets. STUDENT FAQS • Why is three to six months a reasonable time to get an asset such as used delivery truck up and running? • When you have a gain on the exchange of similar assets, why don’t you show it? • Which method of depreciation is always best to use? • Why do accountants have to classify items as capital or revenue expenditures? Why do you treat exchanges of similar and dissimilar assets differently? Aren’t they all exchanges? 155 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. 156 Chapter 10 Fixed Assets and Intangible Assets This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. • Is it true that the higher the depreciation, the lower the net income? If that is the case, why would we not want the lowest depreciation method so we can show the highest net income? • Why do we have various methods of depreciation? Isn’t that encouraging misleading results? • Do you have to use the depreciation method that best matches the use of the asset? For example, would all trucks be required to be depreciated under the units of production method? • Why is it important to use the gain and loss accounts when recording disposals of assets? Why can’t we credit revenue or debit expense on sales of assets? • Why do you update the depreciation before you remove the asset? • Why does it matter if we identify the exchanged assets as similar or dissimilar? • Does it really matter if you classify an item as capital or revenue expenditure? You still spent the same amount of money to acquire or repair the asset....
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This note was uploaded on 09/25/2010 for the course FEUI ACCT01 taught by Professor Prof.steve during the Spring '10 term at Indonesian Computer University.
- Spring '10