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AFM101 Lecture Notes - Lecture 16: Book Value, Product Return, Intangible Asset

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Verified Note
skyoyster237
1 Nov 2018
School
University of Waterloo
Department
Accounting & Financial Management
Course
AFM101
Professor
Haihao Lu

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15

AFM101 Lecture Notes - Lecture 15: Asset, Land Development, Capital Expenditure

16

AFM101 Lecture Notes - Lecture 16: Book Value, Product Return, Intangible Asset

17

AFM101 Lecture Notes - Lecture 17: Agrium, Equity Method, Bruce Power

Document Summary

Companies purchase plant assets whenever they need them, not just at the beginning of the year. Thus, companies must compute depreciation for partial years. Partial depreciation = (cid:1866)(cid:1866)(cid:1873) (cid:1868)(cid:1872)(cid:1867)(cid:1866) (cid:3014)(cid:3042)(cid:3041)(cid:3047) (cid:3046) (cid:3033)(cid:3045)(cid:3042)(cid:3040) (cid:3031)(cid:3047)(cid:3032) (cid:3042)(cid:3033) (cid:3043)(cid:3048)(cid:3045)(cid:3030) (cid:3046)(cid:3032) (cid:3047)(cid:3042) (cid:3052)(cid:3032)(cid:3045) (cid:3032)(cid:3041)(cid:3031) (cid:2869)(cid:2870) After an asset is in use, managers may change its useful life on the basis of. This is called a change in accounting estimate. (cid:3045)(cid:3045)(cid:3052)(cid:3041)(cid:3034) (cid:3040)(cid:3042)(cid:3048)(cid:3041)(cid:3047) (cid:3047) (cid:3031)(cid:3047)(cid:3032) (cid:3042)(cid:3033) (cid:3030) (cid:3041)(cid:3034)(cid:3032) (cid:3032)(cid:3046)(cid:3031)(cid:3048)(cid:3039) (cid:3049)(cid:3039)(cid:3048)(cid:3032) (cid:3047) (cid:3031)(cid:3047)(cid:3032) (cid:3042)(cid:3033) (cid:3030) (cid:3041)(cid:3034)(cid:3032) (cid:3032)(cid:3040)(cid:3041)(cid:3041)(cid:3034) (cid:3048)(cid:3046)(cid:3032)(cid:3033)(cid:3048)(cid:3039) (cid:3039)(cid:3033)(cid:3032) (cid:3047) (cid:3031)(cid:3047)(cid:3032) (cid:3042)(cid:3033) (cid:3030) (cid:3041)(cid:3034)(cid:3032) A fully depreciated asset is an asset that has reached the end of its estimated useful life. The carrying value of a fully depreciated asset is zero. If the company continues to use a fully depreciated asset, it will not recognize any more depreciation expense for the asset but: Both the asset account and its accumulated depreciation account remains in the ledger with no additional depreciation entries.

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Related Questions

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the assets salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in year 2 in the amount of:

A) $10,000

B) $5,000

C) $5,500

D) $20,000

E) $9,250

25.Which of the following items does not affect the calculation of depreciation expense?

A.Economic benefits generated by the asset

B.Useful life of the asset

C.Residual value of the asset

D.Capitalized cost of the asset

26.Which of the following statements is correct when the straight-line method is used to compute depreciation?

A.The carrying value of an asset is a constant amount during the asset's useful life

B.Accumulated depreciation is a constant amount during the asset's estimated useful life

C.Depreciation Expense is a constant amount each year

D.The book value of an asset is an increasing amount during the asset's useful life

27.One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

A.reduces book value below residual value.

B.does not consider the useful life of the asset in the calculation of depreciation.

C.cannot be used for tax purposes.

D.uses book value instead of depreciable cost in the calculation of depreciation.

28.Why don't all companies use the same depreciation method?

A.US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes.

B.Different depreciation methods might better reflect the pattern in which assets' economic benefits are used.

C.All companies do use the same depreciation method.

D.Only large companies are allowed to use some of the more complicated depreciation methods.

A plant assets required at a total cost of $37,500 has anestimated scrap value of %2,500 and an anticipated useful life of 7years.

Determine:

1. The annual rate (expressed as a percentage or fraction) ofdepreciation using the straight-line-method.

2. The annual depreciation using the double declining balancemethod.

3. The first year's straight-line depreciation, assuming thatthe asset was acquired 3 months into the current accountingperiod.

4. Continuing with assumption (3), the value of the accumulateddepreciation account after the second year's depreciation isrecognized.

5. The residual value for the plant assets after the asset hasbeen depreciated for 7 years.

Using the information presented at the beginning of theexercise, determine the five items assuming asset depreciation andusing the sum of the years' digits method.