Finance 2013 Sept10 Accounting(1)

Prepaid depreciation the income statement

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Unformatted text preview: such as intangible prepaid insurance, patents, copyrights, etc. prepaid Depreciation & The Income Statement Depreciation On the Income Statement, depreciation is On recognized as selling, administrative, or manufacturing expense (in cost of goods sold) depending on the nature and use of the assets involved. involved. Depreciation may affect the Income Statement in Depreciation two ways: two Direct expense Cost of inventory in cost of goods sold Depreciation Depreciation Asset with 8-Year Life Annual Depreciation Accumulated Depreciation Cost of Asset ($) Life of Asset (Yrs.) Depreciation Methods Depreciation Based on equal allocation to each time period Straight line Based on output Service hours Productive output Declining depreciation expense each period – Declining accelerated depreciation accelerated Sum-of-years-digits Declining balance Based on investment and interest rate concepts Annuity Sinking fund Balance Sheet Balance A statement of financial position of the firm, statement on a given date, including its asset holdings, liabilities and owner supplied capital liabilities Assets: Represents resources owned by the firm Liabilities & Owners’ Equity: Indicates how those resources were financed BALANCE SHEET BALANCE as of December 31, 2006 ASSETS CURRENT ASSETS Cash & Cash Equivalents Marketable Securities Receivables Inventory Prepaid Expenses TOTAL CURRENT ASSETS TOTAL LIABILITIES & EQUITY CURRENT LIABILITIES Accounts Pa...
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