ch11_ins NIU F11 stu - CHAPTER 11 DEPRECIATION,...

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Click to edit Master subtitle style C H A P T E R 11 DEPRECIATION, IMPAIRMENTS, AND DEPLETION Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield
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1. Explain the concept of depreciation. 2. Identify the factors involved in the depreciation process. 3. Compare activity, straight-line, and decreasing-charge methods of depreciation. 4. Explain special depreciation methods. 5. Explain the accounting issues related to asset impairment. 6. Explain the accounting procedures for depletion of natural resources. 7. Explain how to report and analyze property, plant, equipment, and natural resources. Learning Objectives
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Depreciation Factors involved Methods of depreciation Special methods Special issues Impairments Depletion Presentation and Analysis Recognizing impairments Measuring Impairments Restoration of loss Assets to be disposed of Presentation Analysis Establishing a base Write-off of resource cost Estimating reserves Liquidating dividends Continuing controversy Depreciation,
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Valuation Methods Account Receivables Less: Allowance for Doubtful Account Account Receivables (NRV) Inventory (cost) Less: Allowance to reduce to market price Inventory (market) (Lower-of-cost-or-market)
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Depreciation Depreciation is a means of cost allocation . It is not a method of valuation. Allocating the cost of tangible assets to expense in a systematic and rational manner to periods expected to benefit from use of its depreciable assets. Depreciatio n Allocation Year 1 Year 2 Year 3 Year 4
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The Depreciable Base The difference between an asset's cost and its salvage value. Salvage value is the estimated amount that will be received at the time the asset is sold or removed from service. Original cost $10,000 Less: ___________ 1,000 Depreciation base $9,000 Cost: all expenditures necessary to acquire the asset and make it ready for intended use Useful Life: estimate of the expected life Salvage Value: estimate of the asset’s value at the end of its useful life.
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The Asset's Useful Life The number of years that asset is capable of economically providing the service it was purchased to perform.
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Depreciation Methods Activity method (units of use or production) Straight-line method Decreasing charge methods (accelerated) Sum-of-the years’-digits Declining-balance method Special depreciation methods Group and composite methods Hybrid or combination methods
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Also called variable-charge or Units-of- production approach Assumes that depreciation is a function of use or productivity. The life of the asset is considered in terms of either the output it provides or the number of units of activity it works . (Cost less
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This note was uploaded on 05/25/2011 for the course ACCY 331 taught by Professor Madlinger,l during the Spring '08 term at Northern Illinois University.

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ch11_ins NIU F11 stu - CHAPTER 11 DEPRECIATION,...

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