ch11 - 11-11.Activity, straight-line, and decreasing-charge...

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Unformatted text preview: 11-11.Activity, straight-line, and decreasing-charge methods of depreciation.2.Special depreciation methods.3.Accounting issues related to asset impairment.4.Accounting procedures for depletion of natural resources.5.Reporting and analyzing property, plant, equipment, and natural resources.Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives11-2Allocating costs of long-term assets:Fixed assets = Depreciation expenseIntangibles = Amortization expenseNatural resources = Depletion expenseDepreciationis the accounting process of allocating the cost of tangible assets to expensein a systematic and rational manner, to the periods expected to benefit from the use of the asset.Depreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationLO 1 Explain the concept of depreciation.11-3Depreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationLO 2 Identify the factors involved in the depreciation process.Three basic questions:Factors Involved in the Depreciation Process(1)What depreciable base is to be used?(2)What is the assets useful life?(3)What method of cost allocation is best?11-4Depreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationLO 2 Identify the factors involved in the depreciation process.Estimation of Service LifesFactors Involved in the Depreciation ProcessService life often differs from physical life.Companies retire assets for two reasons: 1.Physical factors (casualty or expiration of physical life).2.Economic factors (inadequacy, supersession, and obsolescence).11-5Depreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationLO 3 Compare activity, straight-line, and decreasing-charge methods of depreciation.The profession requires the method employed be systematic and rational.Examples include:Methods of Depreciation(1)Activity method (units of use or production).(2)Straight-line method. (3)Sum-of-the-years-digits.(4)Declining-balance method.(5)Group and composite methods.(6)Hybrid or combination methods.Accelerated methodsSpecial methods11-6Depreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDepreciation - Method of Cost AllocationDecreasing-Charge MethodsSum-of-the-Years-Digits. Each fraction uses the sum of the years as a denominator(5 + 4 + 3 + 2 + 1 = 15). The numeratoris the number of years of estimated life remaining as of the beginning of the year....
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This note was uploaded on 03/18/2012 for the course ACC 321 taught by Professor Staff during the Spring '08 term at Miami University.

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ch11 - 11-11.Activity, straight-line, and decreasing-charge...

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