BMGT 220, Chapter 9 Discussion Kristian Sooklal 443-797-4588 (cell) | 410-575-4719 (text)

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Presentation transcript:

BMGT 220, Chapter 9 Discussion Kristian Sooklal (cell) | (text)

Plan for today Chapter 8 quiz back ---  Take questions Quiz on Chapter 9 See website for updates: –

Quiz Averages Syllabus – 9.37 Chapter 1 – 7.85 Chapter 2 – 8.2 Chapter 3 – 7.35 Chapter 5 – 5.91 Chapter 6 – 5.85 Chapter 8 – 5.19 Chapter 9 – 10 Overall:

Key Topics in Chapter 9 Plant assets: land, land improvements, buildings, and equipment – Used for operations (not resale), physical, long-term, – Usually depreciated (except land) Depreciation basic formula: (Original Cost – Salvage Value) Useful Life 3 Types of Depreciation: – Straight Line – Units of Activity – Declining Balance Journal Entry: Depreciation Expense 9900 Accumulated Depreciation 9900

Key Topics in Chapter 9 (Continued) Straight Line Depreciation: same amount of yearly depreciation Declining Balance: declining amount of depreciation each year, which ends at the salvage value Units of Activity: amount of yearly depreciation is completely random – depends on the units of activity during each year For all methods of depreciation, TOTAL accumulated depreciation after the useful life will be the same Net Property Plant and Equipment = Total Property Plant and Equipment – Accumulated Depreciation

Key Topics in Chapter 9 (Continued) Disposable of Plant assets: – Retirement, Sale, Exchange Journal Entry for Disposable Gain Entry:Loss Entry: Cash (received)xCash (received)x Accumulated yAccumulatedy Depreciation Depreciation Gain zLossz EquipmentaEquipment a Book Value = Asset Value – Accumulated Depreciation Book Value < Cash Received  Gain Book Value > Cash Received  Loss Book Value = Cash Received  No gain or loss

Key Topics in Chapter 9 (Continued) Natural Resources: standing timber, underground deposits of oil, gas, and minerals – Physically extracted from nature, replaceable only by nature Use “depletion” instead of depreciation Depletion per unit = (Original Cost – Salvage Value) Total Units of Capacity Depletion Expense = Depletion per Unit x Units Extracted and Sold in Period Intangible Assets: patents, copyrights, franchises, licenses, trademarks, trade names, goodwill Purchased Intangibles: recorded at cost, usually capitalized Internally Created Intangibles: generally expensed

Key Topics in Chapter 9 (Continued) Goodwill: excess of purchase price over the Fair market value of the identifiable net assets acquired Only recorded when a business is purchased Cannot capitalize internally created goodwill Goodwill is not amortized but is tested for impairment Journal Entry for Impairment Expense: Loss on Impairment – Goodwillx Goodwillx Asset Turnover Ratio = Net sales / average total assets Hopefully I don’t have to tell you guys what “average” means