Ch+09+Edited

# 3 accounting for plant assets accounting for plant

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

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: d, SO and contrast its expense pattern with those of other methods. and Accounting for Plant Assets Accounting for Plant Assets Depreciation Disclosure in the Notes Illustration 9-14 Chapter 9-30 SO 3 Compute periodic depreciation using the straight-line method, SO and contrast its expense pattern with those of other methods. and Accounting for Plant Assets Accounting for Plant Assets Revising Periodic Depreciation Accounted for in the period of change and future periods (Change in Estimate). Chapter 9-31 Not handled retrospectively. Not considered error. SO 4 Describe the procedure for revising periodic depreciation. Accounting for Plant Assets Accounting for Plant Assets Illustration: Arcadia HS, purchased equipment for \$510,000 which was estimated to have a useful life of 10 years with a salvage value of \$10,000 at the end of that time. Depreciation has been recorded for 7 years on a straight-line basis. In 2012 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of \$5,000 at the end of that time. Questions: What is the journal entry to correct the prior years’ depreciation? Calculate the depreciation expense for 2012. Chapter 9-32 No Entry No Required Required SO 4 Describe the procedure for revising periodic depreciation. Accounting for Plant Assets Accounting for Plant Assets Equipment cost Salvage value Depreciable base Useful life (original) Annual depreciation After 7 years \$510,000 First, establish NBV First, establish NBV - 10,000 attdate of change in a date of change in estimate. 500,000 estimate. 10 years \$ 50,000 x 7 years = \$350,000 Balance Sheet (Dec. 31, 2011) (Dec. Plant Assets: Equipment Accumulated depreciation Net book value (NBV) Net Chapter 9-33 \$510,000 350,000 350,000 \$160,000 SO 4 Describe the procedure for revising periodic depreciation. Accounting for Plant Assets Accounting for Plant Assets Net book value Salvage value (new) Depreciable base Useful life remaining Annual depreciation \$160,000 5,000 155,000 8 years \$ 19,375 After 7 years Depreciation Depreciation Expense calculation Expense calculation ffor2012. or 2012. Journal entry for 2012 and future years. Depreciation expense Accumulated depreciation Chapter 9-34 19,375 19,375 SO 4 Describe the procedure for revising periodic depreciation. Accounting for Plant Assets Accounting for Plant Assets Expenditure During Useful Life Ordinary Repairs - expenditures to maintain the operating efficiency and productive life of the unit. Debit - Repair (or Maintenance) Expense. Additions and Improvements - costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset. Chapter 9-35 Debit - the plant asset affected. SO 4 Describe the procedure for revising periodic depreciation. Chapter 9-36 Accounting for Plant Assets Accounting for Plant Assets Impairments Permanent decline in the fair value of an asset. So as not to overstate the asset on the books, the company writes the asset down to it...
View Full Document

## This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

Ask a homework question - tutors are online