04-04-12Class22 EndCh11 begin Ch 16 dilutive secb

Explaintheconceptofdepreciation 2

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ning Objectives Learning Objectives 1. Explain the concept of depreciation. 2. Identify the factors involved in the depreciation process. 3. Compare activity, straight­line, and decreasing­charge 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. Chapter 18-7 Depreciation, Impairments, and Depletion Depreciation, Impairments, and Depletion Depreciation Impairments Depletion Factors involved Methods of Methods depreciation depreciation Special methods Recognizing Recognizing impairments impairments Measuring Measuring Impairments Impairments Restoration of Restoration loss loss Assets to be Assets disposed of disposed Establishing a Establishing base base Write-off of Write-off resource cost resource Estimating Estimating reserves reserves Liquidating Liquidating dividends dividends Continuing Continuing controversy controversy Special issues Chapter 18-8 Presentation and Presentation Analysis Analysis Presentation Analysis Depreciation -- Method of Cost Allocation Depreciation Method of Cost Allocation Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. Allocating costs of long­term assets: Fixed assets = Depreciation expense Intangibles = Amortization expense Natural resources = Depletion expense Chapter 18-9 LO 1 Explain the concept of depreciation. Depreciation -- Method of Cost Allocation Depreciation Method of Cost Allocation Factors Involved in the Depreciation Process Three basic questions: (1) (2) What is the asset’s useful life? (3) Chapter 18-10 What depreciable base is to be used? What method of cost allocation is best? LO 2 Identify the factors involved in the depreciation process. Depreciation -- Method of Cost Allocation Depreciation Method of Cost Allocation Factors Involved in the Depreciation Process Depreciable Base Illustration 11-1 Chapter 18-11 LO 2 Identify the factors involved in the depreciation process. Depreciation -- Method of Cost Allocation Depreciation Method of Cost Allocation Factors Involved in the Depreciation Process Estimation of Service Lifes Service life of an asset often differs from its physical life. Companies retire assets for two reasons: physical factors (such as casualty or expiration of physical life) and economic factors (obsolescence). Chapter 18-12 LO 2 Identify the factors involved in the depreciation process. Depreciation -- Method of Cost Allocation Depreciation Method of Cost Allocation Methods of Depreciation The profession requires the method employed be “systematic and rational.” Examples include: (1) (2) Straight­line method. (3) Sum­of­the­years’­digits. (4) Declining­balance method. (5) Group and composite methods. (6) Chapter 18-13 Activity method (units...
View Full Document

This note was uploaded on 04/02/2013 for the course ACCT 415 at USC.

Ask a homework question - tutors are online