Acct 221 1st Edition Lecture 15 Outline of Last Lecture 1 Tangible Long Term Assets 2 Intangible Assets 3 Capitalize vs Expense Outline of Current Lecture 1 Depreciation a 3 methods 2 Capitalization a 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 4 500 These 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 depending upon 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 life
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