Principles Of Accounting(会计学原理)Chapter_03.ppt

* Part I On December 1, 2009, FastForward purchased equipment for $26,000 cash. The equipment has an estimated useful life of four years or 48-months, and an estimated salvage value of $8,000 at the end of the four-year period. Can you determine the depreciation expense for the month of December, 2009? Part II How did you do? The numerator of the equation is $26,000, cost less salvage value, or $18,000. The denominator is 48 months because we are calculating depreciation for one month, so our monthly depreciation expense is $375. Now, let’s record the adjusting journal entry. * Part I On December 31, 2009, we will debit, or increase, depreciation expense for $375 and credit a new account called accumulated depreciation - equipment. Part II Accumulated depreciation is a contra asset account. A contra-account means that the amount in the account reduces the related asset account. In our case, accumulated depreciation will reduce the asset account, equipment. Because this is a relatively new type of account, let’s look at the treatment of the contra and related asset account. * We have posted the adjusting entry to record depreciation expense. We have also shown you the balance in the equipment account. The depreciation expense account will appear on our income statement for the year ended December 31, 2009. Let’s see how we will deal with the other two accounts on the Balance Sheet. * The contra-account, accumulated depreciation, will be shown as a reduction in the cost of the asset, equipment. Cost of a plant asset less accumulated depreciation is known as book value. So the asset, equipment, will be shown on the balance sheet at its net amount, or book value, of $25,625. Because the contra account appears on the balance sheet it will not be closed at the end of the period. It will be carried forward to 2010 and used to accumulate the depreciation related to the equipment. Now let’s move on to the second category of adjusting entries, deferred revenues. * The ter