ACT 2200 Lecture Notes - Lecture 7: Net Income, Profit Margin, Intangible Asset

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yellowcattle191

29 May 2017

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Allocates a higher depreciation in the earlier years of the asset"s life and lower depreciation in later years. A contra asset account representing the total depreciation taken to date. Allocates an asset"s cost based on its use. Occurs when a new major component is added to an existing asset. Allocation of the cost of an intangible asset over its service life. Measures the sales per dollar of assets invested. Purchase of more than one asset at the same time for one purchase price. Recording all losses in one year to make a bad year even worse. Equal to the original cost of the asset minus the current balance in accumulated depreciation. We record a long-term asset at what to get the asset ready for use? its cost plus all expenditures necessary to get the asset ready for use. Interest costs recorded as assets rather than interest expense.

Related Questions

Depreciation by Three Methods; Partial Years

Perdue Company purchased equipment on April 1 for $48,870. The equipment was expected to have a useful life of three years, or 4,320 operating hours, and a residual value of $1,350. The equipment was used for 800 hours during Year 1, 1,500 hours in Year 2, 1,300 hours in Year 3, and 720 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-output method, and (c) the double-declining-balance method.

Note: FOR DECLINING BALANCE ONLY, round the multiplier to four decimal places. Then round the answer for each year to the nearest whole dollar.

a. Straight-line method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

b. Units-of-output method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

c. Double-declining-balance method

Year	Amount
Year 1	$
Year 2	$
Year 3	$
Year 4	$

Feedback

Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation.

Annual units-of-output depreciation allocates the cost of the asset equally over the units produced (hours).

The double-declining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation.

Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method.

Learning Objective 2.

goldtermite491

Each of the statements appearing below is descriptive of one or more of the following depreciation methods. Create a list numbered 1 â 5 and place the Roman Numeral(s) belonging to the method(s) to which the statement best applies. A method could be used once, more than once or not at all.

I. Component

II. Declining-balance

III. Straight-line

IV. Sum-of-the-years'-digits

V. Units-of-production

____111_ 1. The depreciation charged by this method decreases by the same amount each year.

_____ 2. This method is used if each part of a plant asset is significant to the asset's total cost.

_____ 3. The method allocates larger shares of the cost of a plant asset to expense during the years in which the greatest use is made of the asset.

_____ 4. The method always allocates larger shares of the cost of a plant asset to expense during the earlier years of its life.

_____ 5. Once the depreciable base, residual value, and life of a plant asset are determined, the annual charges to operations under this method will be the same.

rubyalligator107

You have been hired by Patterson Planning Corp., an events planning company that recently had a fire in which some of the accounting records were damaged.

In reviewing the fixed asset records, you find three depreciation schedules that are not labeled. They are listed in the following table. One of the assets has a depreciation rate of $4.40 per hour.

Year	Schedule A	Schedule B	Schedule C
1	$6,000.00	$10,125.00	$8,800.00
2	3,600.00	13,500.00	6,600.00
3	2,160.00	13,500.00	7,480.00
4	1,296.00	13,500.00	6,600.00
5	444.00	3,375.00	4,400.00
6			7,040.00
7			4,840.00
8
Total	$13,500.00	$54,000.00	$45,760.00

Depreciation

1. Determine which depreciation method is shown in each schedule on the Patterson Planning Corp. panel. Then match each schedule to the asset description that best characterizes the type of assets often depreciated using that method.

Asset Description	Depreciation Schedule Used
Asset producing steady revenues
Asset generating greater revenues in the early years
Asset with variable in-service time

2. For each of the depreciation schedules shown on the Patterson Planning Corp. panel, fill in the following information. Leave any cells blank that cannot be determined from the depreciation schedule.

	A	B	C
Useful life
Residual value
Asset cost
Total operating hours

ACT 2200 Lecture Notes - Lecture 7: Net Income, Profit Margin, Intangible Asset

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