Week 2 Class 1

Week 2 Class 1 - Week 2 Class 1 9. An accelerated method,...

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Week 2 Class 1 9. An accelerated method, as allowed by CCRA, is best from an income-tax point of view. It results in the largest deduction and the lowest taxable income in the early years of the asset’s life. Taxpayers benefit by paying less taxes early in the asset’s life, thus conserving cash that they can use in their businesses. (15 min.) E 7-4 Journal ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 1. a. Land…………………………………………… 195,000 Cash………………………………………. .. 195,000 b. Building [$2,500 + $20,000 + $675,000 + ($29,000 × 719,250 9/12)] 580,000 Note Payable………………………… 675,000 Cash [$2,500 + $20,000 + (29,000 × 9/12)] 44,250 c. Amortization Expense……………………… 4,602* Accumulated Amortization ($719,250 – $75,000) / 35 × 3/12… 4,602* *rounded 2. BALANCE SHEET Capital assets: Land………………………………………. .. $195,000 $719,250
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Building……………………………………. Less Accumulated amortization…. (4,602 ) Building, net…………………………. 714,648 3. INCOME STATEMENT Expense: Amortization expense……………… $ 4,602
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(10-15 min.) E 7-5 Amortization is the process of allocating a capital asset’s cost to expense over the period the asset is used. This process is designed to match amortization expense against revenue over the asset’s life in order to measure income. Of less importance is the need to account for the asset’s decline in usefulness. Khuwaja is correct that amortization can relate to
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This note was uploaded on 10/18/2010 for the course ACF ACC220 taught by Professor Fiona during the Spring '08 term at Seneca.

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Week 2 Class 1 - Week 2 Class 1 9. An accelerated method,...

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