Financial Act Chpt 9 Notes

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Unformatted text preview: is similar to Double Declining Balance. Reports high depreciation expense (lower net income) in earlier years, which is an incentive for companies to buy productive assets (and continually update their equipment). MACRS is NOT a depreciation method that can be used under GAAP, for financial reporting. Note: Depreciation Expense has NO EFFECT on cash! It is an adjusting entry recorded to show the "using up" of an asset over time. The cash was spent when the asset was acquired. The recording of depreciation expense has no cash impact (no cash is paid for depreciation)! Asset Impairment: Impairment occurs if estimated benefit of an asset falls below its book value. Then, due to conservatism, the asset is considered impaired and must be written down to its fair market value. Do not book in depreciation account (or accumulated depreciation). Book in a loss account and write down the actual asset. Loss Due to Impairment of Assets 55 Asset (Building, Equipment, etc) Disposal of Property, Plant, and Equipment: If a company decides to dispose of an asset before it is fully depreciated, (whether di...
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This note was uploaded on 01/23/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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