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    Chapter 10: Plant Assets, Natural Resources and Intangibles Important Terms

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    Marwan Dawood
    This document discusses key concepts related to accounting for plant assets, natural resources, and intangibles. It defines important terms like cost, salvage value, useful life, depreciable cost, depreciation expense, accumulated depreciation, and book value. It also discusses different depreciation methods. The document includes examples of calculating depreciation expense using the straight-line, units-of-production, and double-declining balance methods. It provides examples of journal entries to record the disposal of assets under different scenarios involving sale prices.

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    Chapter 10: Plant Assets, Natural Resources and Intangibles Important Terms

    Uploaded by

    Marwan Dawood
    52 views2 pages
    This document discusses key concepts related to accounting for plant assets, natural resources, and intangibles. It defines important terms like cost, salvage value, useful life, depreciable cost, depreciation expense, accumulated depreciation, and book value. It also discusses different depreciation methods. The document includes examples of calculating depreciation expense using the straight-line, units-of-production, and double-declining balance methods. It provides examples of journal entries to record the disposal of assets under different scenarios involving sale prices.

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    Lecture 3

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    This document discusses key concepts related to accounting for plant assets, natural resources, and intangibles. It defines important terms like cost, salvage value, useful life, depreciable cost, depreciation expense, accumulated depreciation, and book value. It also discusses different depreciation methods. The document includes examples of calculating depreciation expense using the straight-line, units-of-production, and double-declining balance methods. It provides examples of journal entries to record the disposal of assets under different scenarios involving sale prices.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    52 views2 pages

    Chapter 10: Plant Assets, Natural Resources and Intangibles Important Terms

    Uploaded by

    Marwan Dawood
    This document discusses key concepts related to accounting for plant assets, natural resources, and intangibles. It defines important terms like cost, salvage value, useful life, depreciable cost, depreciation expense, accumulated depreciation, and book value. It also discusses different depreciation methods. The document includes examples of calculating depreciation expense using the straight-line, units-of-production, and double-declining balance methods. It provides examples of journal entries to record the disposal of assets under different scenarios involving sale prices.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Chapter 10: Plant Assets, Natural Resources and

    Intangibles
    Important Terms:
    a)Cost: consist of all necessary expenditures to acquire it and to prepare it for its intended
    use.
    b) Salvage Value: Residual Value/ Scrap, is an estimate of the assets value, or the amount
    the owner expects to receive from disposing the asset at the end of its benefit period.
    c) Useful life: the estimated years of using and benefiting from the asset in the copmpany's
    operations.
    d) Depreciable cost: is the cost less the salvage value, to be allocated over the useful life.
    e) Depreciation expense:it is the depreciable cost allocated over the useful life. It is a
    noncash expense, appear in the Income statement, Dr. its normal balance.
    f) Accumulated Depreciation: a contra asset account, Cr. Its normal balance.
    Appear in the Balance sheet reduced from its related fixed asset to give the net
    book value.
    g) Book Value: is the difference between the cost and accumulated depreciation.Compared
    with the disposal value to determine the gain or loss from disposal.
    h) Depreciation methods: straight-line, unit of production & double- declining methods.

    • Ex.1:
    Nike Corporation purchased a new equipment on Jan 1, 2010, for $ 14,500. The equipment was
    expected to have a useful life of five years and salvage value of $1,000.The company engineers
    estimated that the equipment would have a useful life of 7,500 hours.It was used 1,500 hours
    in2010, 2,625 hours in 2011, 2,250 hours in 2012, 750 hours in 2013, 375 hours in 2014. The
    company’s year end in December 31.
    Required :Prepare the depreciation shedule using:
    (a) Straight-Line, (b)Unit- of- Production, and (c) Double-Declining Balance.

    • Ex.2:
    Du Page Corporation purchased a new equipment on Jan 1, 2010, for $18,000. The equipment
    was expected to have a useful life of four years and salvage value of $ 2,000. The company
    engineers estimated that the equipment would have a useful life of 160,000 hours processed. It
    was used 40,000 hours in 2010, 60,000 hours in 2011, 35,000 hours in 2012, 25,000 hours in
    2013. The company’s year end in December 31.
    Required: Prepare the depreciation shedule using:
    (a) Straight-Line, (b)Unit- of- Production, and (c) Double-Declining
    Balance.
    • Ex.3:
    Sydney Company owns a machine that cost $250,000 and has accumulated depreciation
    $182,000.
    Prepare the entry to record the disposal of the machine on Jan 3 under each of the following
    independent assumptions:
    1. The machine needed extensive repairs, and it was not worth repairing. Sydney
    disposed of the machine, receiving nothing in return.
    2. Sydney sold the machine for $35,000 cash.
    3. Sydney sold the machine for $68,000 cash.
    4. Sydney sold the machine for $80,000 cash.

    • Ex.4:
    Rayya Co. purchases and installs a machine on Jan.1, 2005, at a total costof $72,000. Straight line
    depreciation is taken each year for 3 years assuming an 5 year life and no salvage value.The
    machine is disposed of on July1, 2008,during its fourth year of service.
    Prepare the entries to record the partial years'depreciation on July 1, 2008, and to record the
    disposal under the following assumptions: (1) the machine is sold for $22, 000 cash,and (2) the
    machine is sold for $15, 000 cash,(3) the machine is sold for $18, 000 cash

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