【正文】 rawHill Impairment of Assets If the cost of an asset cannot be recovered through future use or sale, the asset should be written down to its realizable value. ?The McGrawHill Companies, Inc., 1999 Slide 939 Irwin/McGrawHill Time to move on to a new topic. ?The McGrawHill Companies, Inc., 1999 Slide 940 Irwin/McGrawHill Update depreciation to the date of disposal. Recording cash received (debit) or paid (credit). Removing accumulated depreciation (debit). Journalize disposal by: Removing the asset cost (credit). Recording a gain (credit) or loss (debit). Disposal of Plant and Equipment ?The McGrawHill Companies, Inc., 1999 Slide 941 Irwin/McGrawHill If Cash BV, record a gain (credit). If Cash BV, record a loss (debit). If Cash = BV, no gain or loss. Disposal of Plant and Equipment Recording cash received (debit) or paid (credit). Removing accumulated depreciation (debit). Removing the asset cost (credit). Recording a gain (credit) or loss (debit). ?The McGrawHill Companies, Inc., 1999 Slide 942 Irwin/McGrawHill On September 30, 1999, Evans Map Company sells a machine that originally cost $100,000 for $60,000 cash. The machine was placed in service on January 1, 1994. It has been depreciated using the straightline method with an estimated salvage value of $20,000 and an estimated useful life of 10 years. Let抯 answer the following questions. Disposal of Plant and Equipment Example ?The McGrawHill Companies, Inc., 1999 Slide 943 Irwin/McGrawHill The amount of depreciation recorded on September 30, 1999, to bring depreciation up to date is: a. $8,000. b. $6,000. c. $4,000. d. $2,000. Disposal of Plant and Equipment Example ?The McGrawHill Companies, Inc., 1999 Slide 944 Irwin/McGrawHill The amount of depreciation recorded on September 30, 1999, to bring depreciation up to date is: a. $8,000. b. $6,000. c. $4,000. d. $2,000. Annual Depreciation: ($100,000 $20,000) 247。 barn, land, and animals. Allocation of a LumpSum Purchase ?The McGrawHill Companies, Inc., 1999 Slide 913 Irwin/McGrawHill Special Considerations The total cost must be allocated to separate accounts for each asset. The allocation is based on the relative Fair Market Value of each asset purchased. Allocation of a LumpSum Purchase ?The McGrawHill Companies, Inc., 1999 Slide 914 Irwin/McGrawHill Capital Expenditures and Revenue Expenditures T o c a p i t a l i ze a ne x p e n d i t u r e m e a n s t o c h a r g ei t t o a n a s s e t a c c o u n t .A n y m a t e r i a l e x p e n d i t u r et h a t w i l l b e n e f i t s e v e r a la c c o u n t i n g p e r i o d s .Ca p i t a lE x p e n d i t u r eT o e x p e n s e a ne x p e n d i t u r e m e a n s t o c h a r g ei t t o a n e x p e n s e a c c o u n t .E x p e n d i t u r e s f o r o r d i n a r yr e p a i r s a n d m a i n t e n a n c e .Re v e n u eE x p e n d i t u r e?The McGrawHill Companies, Inc., 1999 Slide 915 Irwin/McGrawHill Depreciation The allocation of the cost of a plant asset to expense in the periods in which services are received from the asset. Cost of plant assets Balance Sheet Assets: Plant and equipment Ine Statement Revenues: Expenses: Depreciation as the services are received ?The McGrawHill Companies, Inc., 1999 Slide 916 Irwin/McGrawHill ?Book Value ? Cost Accumulated Depreciation ?Accumulated Depreciation ? Contraasset ? Represents the portion of an asset抯 cost that has already been allocated to expense. ?Causes of Depreciation ? Physical deterioration ? Obsolescence Depreciation ?The McGrawHill Companies, Inc., 1999 Slide 917 Irwin/McGrawHill Cost Residual Value Life in Years Depreciation Expense per Year = StraightLine Depreciation ?The McGrawHill Companies, Inc., 1999 Slide 918 Irwin/McGrawHill StraightLine Method Example On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 1998 using the straightline method. ?The McGrawHill Companies, Inc., 1999 Slide 919 Irwin/McGrawHill StraightLine Method Example C o s t ? R e s i d u a l V a l u e 2 4 , 0 0 0$ ? 3 , 0 0 0$ = 4 , 2 0 0$ p e r y e a rY e a r s o f U s e f u l L i f e =5On January 1, 1998, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an estimated residual value of $3,000 and an estimated useful life of 5 years. Compute depreciation for 1998 using the straightline method. ?The McGrawHill Companies, Inc., 1999 Slide 920 Irwin/McGrawHill StraightLine Method Example Bass Co. will record $4,200 depreciation each year for five years. Total depreciation over the estimated useful life of the boat is: D e pr e c i a t i on A c c um ul a t e d A c c um ul a t e d U nde pr e c i a t e dE x pe ns e D e pr e c i a t i on D e pr e c i a t i on B a l a nc eY e a r ( de bi t ) ( c r e di t ) B a l a nc e ( boo k v a l ue )2 4 , 0 0 0$ 1998 4 , 2 0 0$ 4 , 2 0 0$ 4 , 2 0 0$ 1 9 , 8 0 0 1999 4 , 2 0 0 4 , 2 0 0