Acct. 221 1st Edition Lecture 15Outline of Last Lecture 1. Tangible Long Term Assets2. Intangible Assets3. Capitalize vs. ExpenseOutline of Current Lecture 1. Depreciation a. 3 methods2. Capitalizationa. Salvage value Current Lecture Depreciation 1. Straight-line method Same amount of depreciation is taken each accounting period - Ex. Acquire $25,00 cash from the sale of common stock to purchase the truck Debit Cash Credit Common stock- Purchase a truck on Jan. 1st, 2009, for a net cost of $24,000 Credit Cash Debit Truck - Use the truck to generate 10,000 of revenue for the period. Depreciation expense calculated under straight-line is determined as follows: Asset Cost-Salvage value / Life in years 24-4 / 4yrs = $5,000 per year Accumulated Deprecation – contra account for assets Record: credit 5,0000 to accumulated depreciation- truck Debit depreciation expense for 5,000- Sell truck for $4,500These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Debit cash 4,500 Credit truck 24,000 Debit accumulated depreciation 20,000 Credit gain on sale of truck 500 2. Double-Declining –Balance Produces more depreciation expense in the early years of an asset’s life, with a declining amount of expense in later years 3. Units of Production Produces varying amounts of depreciation in different accounting periods dependingupon the number of units produced Cost to be capitalized: Whatever it takes to get the asset up and running Salvage value = value on books if you sold equipment at the end of its
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