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Ch+09+Edited

# 7 identify the basic issues related to reporting

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Unformatted text preview: sentation of Long-Lived Assets A difference between accrual-accounting net income and net cash provided by operating activities is caused by depreciation and amortization expense. Chapter 9-62 SO 8. Calculation of Depreciation Using Other Methods appendix 9A Declining-Balance Decreasing annual depreciation expense over the asset’s useful life. Double declining-balance rate is double the straight-line rate. Rate applied to book value. Illustration 9-A1 Chapter 9-63 SO 9 SO Compute periodic depreciation using the decliningCompute balance method and the units-of-activity method. Calculation of Depreciation Using Other Methods appendix 9A Illustration: (Declining-Balance Method) Declining Balance x Rate = Annual Expense Accum. Deprec. Book Value \$ 5,200 \$ 5,200 \$ 7,800 Illustration 9-A2 Year Beginning Book value 2012 13,000 40% 2013 7,800 40 3,120 8,320 4,680 2014 4,680 40 1,872 10,192 2,808 2015 2,808 40 1,123 11,315 1,685 2016 1,685 40 12,000 1,000 2012 Journal Entry Chapter 9-64 685* Depreciation expense 5,200 Accumulated depreciation * Computation of \$674 (\$1,685 x 40%) is adjusted to \$685. 5,200 Partial Year appendix 9A Purchased on 4/1/12 Illustration: (Declining-Balance Method) Declining Current Beginning Balance Annual Partial Year Accum. Year Book Value Rate Expense Year Expense Deprec. 2012 \$ 13,000 x 40% =\$ 5,200 x 2013 9,100 x 40% = 3,640 3,640 7,540 2014 5,460 x 40% = 2,184 2,184 9,724 2015 3,276 x 40% = 1,310 1,310 11,034 2016 1,966 x 40% = 786 786 11,821 2017 1,179 x 40% = 472 179 12,000 9/12 =\$ Plug \$ 3,900 \$ 3,900 12,000 Journal entry: 2012 Chapter 9-65 Depreciation expense Accumultated depreciation SO 9 SO 3,900 3,900 Compute periodic depreciation using the decliningCompute balance method and the units-of-activity method. Calculation of Depreciation Using Other Methods appendix 9A Units-of-Activity Suited to equipment whose activity can be measured in units of output, miles driven, or hours in use. Calculate depreciation cost per unit. Expense varies based on units of activity. Depreciable cost is cost less salvage value. Chapter 9-66 SO 9 SO Illustration 9A-3 Compute periodic depreciation using the decliningCompute balance method and the units-of-activity method. Calculation of Depreciation Using Other Methods appendix 9A Illustration: (Units-of-Activity Method) Hours Rate per = Accum. Book Expense Deprec. Value Used 2012 15,000 \$ 0.12 \$ 1,800 \$ 1,800 \$ 11,200 2013 30,000 0.12 3,600 5,400 7,600 2014 20,000 0.12 2,400 7,800 5,200 2015 25,000 0.12 3,000 10,800 2,200 2016 10,000 0.12 1,200 12,000 1,000 Chapter 9-67 Hour Annual Year 2012 Journal Entry x Illustration 9A-4 Depreciation expense Accumulated depreciation SO 9 SO 1,800 1,800 Compute periodic depreciation using the decliningCompute balance method and the units-of-activity method....
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