Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely.

Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Define, classify, and account for the cost of fixed assets 1

Nature of ______ Assets o Fixed ______ are long-term or relatively ______ assets, such as ______, ______, ______, and ______. Other descriptive titles for fixed assets are ______ ______ or ______, ______, and ______.

Nature of ______ Assets o ______ ______ have the following characteristics:  ________________________________________

C LASSIFYING C OSTS

Costs of ______ Fixed Assets o Unnecessary costs that do not ______ the asset’s ______ are recorded as an expense.  ______________________________  Uninsured theft  ______________________________

Capital and Revenue Expenditures o _________ that benefit only the current period are called _________ ______.

Capital and Revenue Expenditures o ______ that improve the asset or ______ its ______ ______ are ______ ___________.

____________ AND ____________ E XPENDITURES ____________ Expenditures  ____________ ____________ ____________ ____________ Expenditures  ____________ ____________ ____________

____________ ____________ and Repairs o On April 9, the firm paid $300 for a tune-up of a delivery truck. __________

Asset ____________ o On May 4, a $5,500 hydraulic lift was installed on the delivery truck to allow for easier and quicker loading of heavy cargo. _________

________ ________ ____________ Repairs The engine of a forklift that is near the end of its useful life is overhauled at a cost of $4,500, which extends its useful life by eight years. Work on the forklift was completed on October 14.

____________ Fixed Assets o The ____________ parties to a lease contract are as follows:  __________________________________________

____________ Fixed Assets o A ____________ lease is accounted for as if the ____________ has, in fact, purchased the asset. The asset is then ____________ (written off as an ____________ ) over the life of the ____________ ___________.

Leasing Fixed Assets o A ____________ that is not classified as a capital lease for accounting purposes is classified as an ____________ ____________. An ____________ ____________ is treated as an ____________, because the ____________ is renting the asset for the ____________ ____________.

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Compute depreciation, using the following methods: straight-line method, units-of-production method, and double-declining-balance method 2 Learning Objective

Depreciation o Over time, most ____________ assets (____________, ____________, and ____________ ____________ ) lose their ability to ____________ ____________. The periodic recording of the ____________ of ____________ assets as an ____________ is called ____________.

Accounting for ____________ o ____________ can be caused by ____________ or ____________ factors.  ______________________________________ ______________________________________ ______________________________________

Accounting for Depreciation o Two common misuderstandings that exist about ____________ as used in accounting include:  ______________________________________ ______________________________________ ______________________________________

Factors in ____________ Depreciation o ____________ factors determine the depreciation expense for a ____________ ____________. These three factors are:  ______________________________________

Factors in Computing Depreciation o The ____________ ____________ life of a fixed asset is ____________ at the time the asset is ____________ into ____________. The ____________ value of a fixed asset at the end of its ____________ ____________ is also ____________ at the time the asset is ____________ into ____________.

______ - ______ Method o The ____-____ method provides for the ______ amount of depreciation expense for ______ ______ of the asset’s ______ ______. Annual Depreciation =

Annual Depreciation = Cost – Residual Value Useful Life $ - $ years = $________ = $________ ______-_______ Method  Initial cost: $24,000  Expected useful life5 years  Estimated residual value: $2,000 o The annual _______-_________ depreciation of $ ______ is computed below:

$ $_______ x ____/12 = $ ______ ______ -Line Method o If the preceding equipment was purchased and placed into service on October 1, the depreciation for the first year of use would be $_______, computed as follows:

Units - __ - ___________ Method o The ____-_-_______ method provides the same amount of depreciation expense for each ______ ______ or ______ unit of ______ used by the asset.  Step 1. Determine the depreciation per unit as:  Step 2. Compute the depreciation expense as: Depreciation Expense = __________________ x _______________ Depreciation per Unit =

________ - ________ - Balance Method o The ___-__-___ method provides for a ________ periodic expense over the ________ ________ life of the asset.

(continued) ________ - ________ -Balance Method o The ___-_____ -balance method is applied in three steps:  Step 1.________________________________________ ________________________________________ ________________________________________  Step 2.________________________________________ ________________________________________ ________________________________________  Step 3.________________________________________ ________________________________________ ________________________________________

Double-Declining-Balance Method o The double-declining-balance rate is determined by ________ the ____-____ rate. o A shortcut to determining the ___-_____ rate is to divide ________ by the ________ of ________ (for example, 1 ÷ _____ = ____). o Using the double-declining-balance method, a five-year life results in a ________ ________ rate ( ____x____ ).

Double-Declining-Balance Method o For the first year, the book value of the equipment is its initial cost of $24,000. o After the ________ year, the ________ value ( ________ minus ________ ________ ) declines and, thus, the ________ also ________.

Double-Declining-Balance Method o If the preceding equipment was purchased and placed into service on October 1, depreciation for the year ending December 31 would be $ ________, computed as follows: = $ _____ x __/12 = $ ______ First year partial depreciation

= [40% x ($24,000 – $ ______ )] Second year depreciation $ = $ ________ Second year depreciation Double-Declining-Balance Method o The depreciation for the ________ year would then be $ ________, computed as follows:

Double-Declining-Balance Method o The double-declining-balance method provides a ________ depreciation in the ________ year of the asset’s use, followed by ________ ________ amounts. Thus, it is called an ________ ________ method.

Depreciation for Federal Income Tax o The Internal Revenue Code specifies the ________ ________ ________ ________ ________ (MACRS) for use by businesses in computing depreciation for tax purposes.

Depreciation for Federal Income Tax o MACRS specifies ________ classes of useful life and depreciation rates for ________ of the ________ classes. The two most common classes are the ____-____ class (includes ________ and ___-_____ trucks) and the ____- year class (includes most ________ and ________ ).

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Journalize entries for the disposal of fixed assets 3

________ Fixed Assets o Equipment acquired at a cost of $25,000 is fully depreciation at December 31, 2013. On February 14, 2014, the equipment is ________.

________ Fixed Assets o Equipment costing $6,000, with no residual value, is depreciated at an annual straight-line rate of 10%. After the December 31, 2013, adjusting entry, Accumulated Depreciation— Equipment has a $4,650 balance. On March 24, 2014, the asset is removed from ________ and ________.

Discarding Fixed Assets $_____ × ___/12

Discarding Fixed Assets o The discarding of the equipment is then recorded as shown below. (Note that this is the second of two entries on March 24.)

________ Fixed Assets o Equipment was purchased at a cost of $10,000. It had no estimated residual value and was depreciated at a straight-line rate of 10%. The equipment is sold for cash on October 12 of the eighth year of its use. The balance of the accumulated depreciation account as of the preceding December 31 is $7,000. (continued)

________ Fixed Assets o The entry to ________ the depreciation for the ________ months of the ________ year is as follows:

Selling Fixed Assets o After the current depreciation is recorded, the book value of the asset is $2,250 ($10,000 – $7,750).

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Compute depletion and journalize the entry for depletion 4

Natural Resources o The process of transferring the cost of ________ ________ to an expense account is called ________.

________ ________  Step 1: Determine the ________ rate as:  Step 2: Multiply the ________ rate by the ________ extracted during the ________.

Natural Resources o The adjusting entry to record the depletion is shown below.

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the accounting for intangible assets, such as patents, copyrights, and goodwill 5

Intangible Assets o ________, ________, ________, and ________ are ____-____ assets that are used in the operations of a business and not held for sale. These assets are called ________ ________ because they ___ _____ exist physically.

________ ________ o The accounting for ________ ________ is similar to that for fixed assets. The major issues are:  Determining ____________________________________ ______________________________________________ ______________________________________________

________ o The exclusive right granted by the ________ ________ to produce and sell goods with one or more ________ ________ is called a _______. These rights continue in effect for ________ ________.

Patents o Because a ________ (as well as other ________ ________ ) does not exist ________, it is acceptable to ________ the asset. This approach is different from physical fixed assets, which require the use of a ________ asset account.

________ and Trademarks o The ________ ________ granted by the ________ ________ to publish and sell a ________, ________, or musical composition is called a ________. A ________ extends for 70 years beyond the ________ ________.

Copyrights and ________ o A ________ is a unique name, ________, or ________ used to ________ a business and its products. Most businesses identify their ________ with ® in their advertisements and on their products. ________ can be registered for ________ years and ________ for ________ - year periods thereafter.

________ o In business, ________ refers to an ________ ________ of a business that is created from such ________ factors as ________, ________ ________, ________, and ________ ________.

Goodwill o Generally accepted accounting principles (GAAP) permit ________ to be recorded in the accounts ________ if it is ________ determined by a ________.

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe how depreciation expense is reported in an income statement and prepare a balance sheet that includes fixed assets and intangible assets 6

Fixed and Intangible ________ o ________ ________ are usually reported in the ________ ________ in a separate section ________ fixed assets. o The balance of each class of ________ ________ should be disclosed ________ of ________ ________. o The cost and related ________ ________ of mineral rights are normally shown as part of the ________ ________ section of the ________ ________.

c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate the fixed asset turnover ratio to assess the efficiency of a company’s use of its fixed assets 7

________ ________ Turnover Ratio o One measure of the ________ - ________ efficiency of fixed assets is the ________ ________ ________ ________. It measures the number of ________ of ________ earned per dollar of ________ ________ and is computed as follows: Fixed Asset Turnover Ratio =

Exchanging Similar ________ ________ o Old equipment is often traded for ________ equipment having a ________ use. In such cases, the ________ allows the buyer a ____- ____ allowance for the ________ equipment traded in. o The remaining balance—the amount ________ —is either paid in cash or recorded as a ________. It is normally called ________.

Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely.

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Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely.

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Presentation on theme: "Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely."— Presentation transcript:

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