《financial Accouning, 9e财务会计 Warren》ch10.pptVIP

Nature of Fixed Assets Classifying Costs Purchase price Sales taxes Permits from government agencies Broker’s commissions Title fees Surveying fees Land Improvements Trees and shrubs Fences Parking areas Outdoor lighting Concrete sewers and drainage Paved parking areas Sales taxes Freight Installation Repairs purchase of used equipment Reconditioning purchase of used equipment Nature of Depreciation Depreciation Expense Factors 1 $24,000 $24,000 $4,400 $19,600 2 24,000 $ 4,400 19,600 4,400 15,200 3 24,000 8,800 15,200 4,400 10,800 4 24,000 13,200 10,800 4,400 6,400 5 24,000 17,600 6,400 4,400 2,000 Accounting for Fixed Asset Disposals When fixed assets lose their usefulness they may be disposed of in one of the following ways: 1. discarded, 2. sold, or 3. traded exchanged for similar assets. Required entries will vary with type of disposition and circumstances, but the following entries will always be necessary: An asset account must be credited to remove the asset from the ledger, and the related Accumulated Depreciation account must be debited to remove it’s balance from the ledger. Gain or loss will be reported in the income statement as Other Income or Other Loss. Trade-in Allowance TIA – amount allowed for old equipment toward the purchase price of similar new assets. Boot – balance owed on new equipment after trade-in allowance has been deducted. TIA Book Value Gain on Trade TIA Book Value Loss on Trade Gains are never recognized not recorded . Losses must be recognized recorded . Dec. 31 Amortization Expense 20,000 Patents 20,000 Discovery Mining Co.Partial Balance SheetDecember 31, 2006 Accum. Book Property, plant, and equipment: Cost Depr. Value CASE ONE GAIN : Trade-in allowance, $1,100 Cash paid, $3,900 $5,000 – $1,100 TIA Book Value Gain $1,100 – $800 $300 Boot + Book Cost of New Equipment $3,900 + $800 $4,700 List price of new equipment acquired $5,000 Cost of old equipment traded in $4,000 Accu