中央财经大学会计专业英语教程Chapter3.ppt
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1、Chapter3 Accounting for Assets(),Feature Topic: The characteristics of Property, Plant and Equipment,To be included in this category, an asset must have 3 characteristics: 1. The asset must be held for use and not for investment. 2. The asset must have an expected life of more than on year. 3. The a
2、sset must be tangible in nature.,Chapter Skeleton,P 66-67,3.1 Plant and Equipment,The term plant and equipment is used to describe long-lived assets acquired for use in the operations of the business and not intended for resale to customers.,Determining the cost of plant and equipment,The cost of pl
3、ant an equipment includes all expenditures reasonable and necessary in acquiring an asset and placing it in a position and condition for use in the operation of the business. Only reasonable and necessary expenditures should be included Example,Land,When land is purchased, various incidental costs a
4、re incurred, in addition to the purchase price.,Apportionment of a lump-Sum purchase,When land and buildings are purchased for a lump sum, the purchase price must be apportioned between land and buildings. Illustration 3-1: p68,Land Improvements: Improvements to real estate such as driveways, fences
5、, parking lots, and sprinkler systems, have a limited life and are therefore subject to depreciation. Buildings,Depreciation Allocating the cost of plant and equipment over the years of usage,Tangible plant assets, with the exception of land, are of use to a company for only a limited number of year
6、s. Depreciation, as the term is used in accounting, is the allocation of cost of a tangible plant asset to expense in the periods in which services are received from the asset. The journal entry to record depreciation expense consists of a debit to Depreciation expense and a credit to Accumulated De
7、preciation.,Allocating the cost of plant and equipment over the years of usage,Depreciation is a process of cost allocation, not a process of valuation. There are two major causes of depreciation: physical deterioration and obsolescence.,Methods of computing depreciation,Straight-Line Method: the si
8、mplest and most widely used method. 1.Annual Deprecation=Cost or Residual Value/Years of Useful Life Units-of-Output method: for certain kinds of assets, more equitable allocation of the cost can be obtained by dividing the cost by the estimated units of output rather than by the estimated years of
9、useful life. 1.This method is suitable only when the total units of the asset over its entire life can be estimated with reasonable accuracy.,Accelerated Depreciation methods. 1.The term accelerated means recognition of relatively large amounts of depreciation in the early years of use and reduced a
10、mounts in the later years. Fixed-Percentage-of-Declining-Balance Method 1.The most widely used form of accelerated depreciation is the fixed-percentage-of-declining-balance method. 2.Depreciation expense=Remaining Book Value* Accelerated Depreciation Rate. 3. Illustration 3-2,Sum-of-the-Years- Digit
11、s Method 1.The depreciation rate is stated as a fraction, which gets smaller each year. These “shrinking fractions ” determine the percentage of the assets depreciable amount charged to depreciation expense ear year. 2.Example Depreciation for Fractional Periods 1.Round the calculation to the neares
12、t whole month. 2.Or half-year convention, is to record six months depreciation on all assets acquired during the year.,Disposal of Plant and Equipment,When depreciable assets are disposed of at any date other than the end of the year, an entry should be made to record depreciation fob the fraction o
13、f the year ending with the date of disposal. As units of plant and equipment wear out or become obsolete, they must be scrapped, sold, or traded in on new equipment. Entry Example: p73,Gains and Losses on disposal of plant and equipment,Disposal at a Price above the book value Disposal at a Price be
14、low the book value Disposal at a price equal to book value,Cost of Intangibles,Illustration 3-3. Cost of Intangibles,Amortization or Impairment of intangible assets,Intangible assets are separated into three categories to determine whether or not they are amortized, and how they are reviewed for imp
15、airment: 1. Intangible assets with a finite(limited) life 2. Intangible assets with an indefinite life 3. goodwill,Intangible assets with a finite life are amortized,Factors should consider in estimating the useful life of the an intangible asset. The calculation of the amortization of intangible as
16、sets follows the same principles as the depreciation of tangible assets. Entry Example: p76,Intangible assets with an indefinite life are reviewed for impairment,Some indefinite intangible assets, such as a trademark have a potentially indefinite life. Example: p 76 An intangible asset is impaired w
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