ch11-5th_outline - 1 CHAPTER 11 Spiceland, Sepe, Nelson,...

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1 CHAPTER 11 Spiceland, Sepe, Nelson, and Tomassini – Fifth Edition OPERATIONAL ASSETS: UTILIZATION AND IMPAIRMENT Revised January 2010 Learning Objectives 1. Explain the purpose of depreciation, depletion, and amortization in financial accounting. 2. Define the terms - historical cost, salvage or residual value, useful life, cost allocation pattern - and explain their effect on the determination of depreciation, depletion, and amortization. 3. For each of the following individual asset depreciation methods - straight line, double declining balance, sum of the years digits, activity (units of input, units of production/output): a. Explain the assumptions underlying the method. b. Explain the circumstances under which it is theoretically appropriate to use the method. c. Compute depreciation expense for both full years and partial years. d. Prepare the journal entry to record depreciation expense. 4. Using the group/composite methods of depreciation: a . Compute depreciation expense. b. Prepare the journal entry to record depreciation expense. c. Prepare the journal entry to record the retirement of an individual asset in the group. 5. Identify factors involved in the selection of depreciation methods. 6. Compute depletion on natural resources using the units of production (activity) method, compute the amount of depletion that should be assigned to units sold and units unsold for purposes of financial statement reporting, and prepare the journal entry to record depletion. 7. Determine the appropriate period over which to depreciate the costs of tangible assets associated with the exploration, development, or production of natural resources. 8. Explain how the useful life of intangible assets is determined under GAAP. 9. Prepare the journal entry to record amortization of intangibles and computer software costs. 1
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10. Explain the differences between the approach used under GAAP for deciding when an impairment in value of intangible assets with indefinite lives and an impairment in value of goodwill should be recognized. 11 . Explain the approach used under GAAP for deciding when an impairment in value of noncurrent assets should be recognized. 12. Prepare the journal entries to record impairments of operational assets and goodwill, including (if applicable) recording depreciation following an impairment write- down, and recording a recovery of an impairment write-down 13. Compute depreciation expense, amortization expense, or depletion following a change in estimate or a change in accounting principle. 14. Prepare the journal entry to record the disposal of plant assets, natural resources, and intangibles. 15. Explain the differences between capital and revenue expenditures and classify subsequent expenditures as capital or revenue expenditures. 16.
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This note was uploaded on 11/09/2010 for the course ACCT 301 taught by Professor Lynn during the Spring '10 term at University of Baltimore.

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ch11-5th_outline - 1 CHAPTER 11 Spiceland, Sepe, Nelson,...

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