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Unformatted text preview: 1111.Activity, straightline, and decreasingcharge 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 Objectives112Allocating costs of longterm 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.113Depreciation  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?114Depreciation  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).115Depreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationLO 3 Compare activity, straightline, and decreasingcharge 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)Straightline method. (3)Sumoftheyearsdigits.(4)Decliningbalance method.(5)Group and composite methods.(6)Hybrid or combination methods.Accelerated methodsSpecial methods116Depreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationDepreciation  Method of Cost AllocationDecreasingCharge MethodsSumoftheYearsDigits. 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.
 Spring '08
 STAFF
 Depreciation, Impairment

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