Acct. 221 1st Edition Lecture 16Outline of Last Lecture 1. Depreciation a. 3 methods2. Capitalizationa. Salvage value Outline of Current Lecture 1. Depreciation Methodsa. Double-Decliningb. Units of Production Method2. Natural Resources 3. Expensing Intangible Assets4. Current versus Noncurrent Current Lecture Depreciation Methods Double-Declining (1/(# of years expected for useful life)) = % x 2 = xx% - xx% is the amount you multiply by the book value of the asset each year to find the depreciation expense Units of Production Method (Cost – Salvage Value) / Total estimated units of production = Depreciation charge per unit of production Depreciation charge per unit of production x units of production n current accounting period = depreciation expense - Ex. $24,000-$4,000/100,000 miles = $0.20 per mile - .2 * 30,000 miles = $6,000 = depreciation expense for the year Natural Resources Ex. Martin Minining Company paid $10,000 cash to purchase land that is expected to yield 5,000,000 tons of coal. After all coal is extracted the land is not expected to have any salvage value. During 2014, the company extracted and sold 500,000 tons of coal. 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. $10,000,000 - $0 (Salvage Value) / 5,000,000 tons = $2.00 per ton extracted and sold Credit cash 10,000,000 Debit coal mine 10,000,000 Cash flow = investing When expensed: credit coal mine for 1,000,000- Debit expense (equity) for 1,000,000 Expensing Intangible Assets An asset with an indefinite useful life is amortized using the straight-line method over the intangibles legal life or its useful life Ex. Assume we purchase a patent that has 20-year legal and useful life for 20,000 cash.- Credit cash 20,000- Debit patent 20,000- Expense: Credit patent 1,000 Debit expense 1,000 Current versus Noncurrent Current liabilities are due within 1 year or an operating cycle, whichever is longer Current liabilities include: Accounts payable Short-term notes payable Wages payable Taxes payable Interest
View Full Document
Unlocking...