Kế toán, kiểm toán - Long - Term assets

Long-term AssetsTypes of Long-Term AssetsProperty, plant, and equipmentLong-term assets acquired for use in operationsNatural resourcesLong-term assets with a value that decreases through use or saleTypes of Long-Term AssetsIntangible assetsLong-term assets that do not have physical substancePlant Asset CostPurchase price (less cash discount)Plant Asset CostPurchase price (less cash discount) plus all other reasonable and necessary expendituresPlant Asset CostPurchase price (less cash discount) plus all other reasonable and necessary expenditures to prepare the asset for useExamples of Items IncludedPurchase price less any cash discountShipping costsInstallation costsCost of modificationsInterest cost during constructionDepreciationAllocation of the cost of an asset to the periods the asset benefitsNot a valuation processFactors in Estimating DepreciationInitial costEstimated residual valueEstimated Useful LifeDepreciation MethodsStraight-lineallocate an equal amount to each periodProduction unitdepreciation based on volume of outputAccelerated Depreciation MethodsDouble Declining-balanceapply a uniform rate to a declining amount (book value)Sum-of-the-Years’-Digitsannual amount the decreases by a constant amountExample DataDepreciable Asset - TruckInvoice price $20,000Cash discount 2%Modifications $3,400Estimated residual value $2,000Useful life - 4 years or 200,000 milesAcquisition date - January 8, 19X1Cost of TruckInvoice price $20,000Less: Cash discount 400 subtotal $19,600Modification 3,400Cost $23,000Straight-Line MethodCost - Est. Residual ValueEst. Useful Life=DepreciationExpenseStraight-Line Method Expense Accum19X1: ($23,000 - $2,000) / 4 $5,250 $5,25019X2: ($23,000 - $2,000) / 4 $5,250 $10,50019X3: ($23,000 - $2,000) / 4 $5,250 $15,75019X4: ($23,000 - $2,000) / 4 $5,250 $21,000Production Units MethodCost - Est. Residual ValueEst. Useful Life in Units=DepreciationExpenseper UnitDepreciationExpenseper UnitXUnitsProduced=DepreciationExpenseProduction Units Method Exp Accum ($23,000 - $2,000) / 200,000 = $0.105 per mile19X1: 50,000 miles X $0.105 $5,250 $5,25019X2: 40,000 miles x $0.105 $4,200 $9,45019X3: 60,000 miles x $0.105 $6,300 $15,75019X4: 10,000 miles x $0.105 $1,050 $16,80019X5: 20,000 miles x $0.105 $2,100 $18,90019X6: 20,000 miles x $0.105 $2,100 $21,000Double-Declining BalanceCalculate a straight-line rate1 divided by estimated useful lifeMultiply straight-line rate by 2Multiply previous asset book value by doubled rateDouble-Declining Balance Exp Accum 19X1: ($23,000 - $0) x (2)(1/4) $11,500 $11,50019X2: ($23,000 - $11,500) x .5 $5,750 $17,25019X3: ($23,000 - $17,250) x .5 $2,875 $20,12519X4: ($23,000 - $20,125) x .5 $1,438 $21,623overdepreciatedDouble-Declining Balance Exp Accum 19X1: ($23,000 - $0) x (2)(1/4) $11,500 $11,50019X2: ($23,000 - $11,500) x .5 $5,750 $17,25019X3: ($23,000 - $17,250) x .5 $2,875 $20,12519X4: ($23,000 - $20,125) x .5 $1,438 $21,623overdepreciated19X4: ($23,000 - $2,000) - $20,125 $875 $21,000Double-Declining Balance Exp Accum 19X1: ($23,000 - $0) x (2)(1/4) $11,500 $11,50019X2: ($23,000 - $11,500) x .5 $5,750 $17,25019X3: ($23,000 - $17,250) x .5 $2,875 $20,12519X4: ($23,000 - $2,000) - $20,125 $875 $21,000Sum-of-the-Years’-Digits(Cost - Est. Residual Value)xIndividual Year(reverse order)Sum of Years’DigitsSum-of-the-Years’-DigitsCalculating sum of years’ digitsAdd the numeric digits in useful lifeExample1 + 2 + 3 + 4 = 10Sum-of-the-Years’-Digits Exp Accum 19X1: ($23,000 - $2,000) x 4/10 $8,400 $ 8,40019X2: ($23,000 - $2,000) x 3/10 $6,300 $14,70019X3: ($23,000 - $2,000) x 2/10 $4,200 $18,90019X4: ($23,000 - $2,000) x 1/10 $2,100 $21,000Pattern of depreciation expenseStraight-lineAmount is constant and equalProductionAmount varies depending on usagePattern of depreciation expenseDouble decliningAmount is decreasing by decreasing amountsSum-of-the-Year’s-DigitsAmount is decreasing by constant amountComparison of DepreciationStraight-lineProductionComparison of DepreciationDouble-declining balanceSum-of-the-Years’ DigitsModified Accelerated Cost Recovery System - MACRSIncome tax reporting methodApplies to tangible property placed in service after 1986Eight cost recovery classes with rates for each yearTax deduction equals cost times appropriate rate for each yearRevenue and Capital ExpendituresRevenue expenditureBenefits only the current accounting periodCapital expenditureSignificant costs that benefit two more accounting periodsCapital ExpendituresAdditionsEnhance usefulness by enlarging assetDebited to assetBettermentsIncrease or improve servicesDebited to assetCapital ExpendituresExtraordinary repairsSignificant expenditures that extend useful life or change residual valueDebited to accumulated depreciationIn all capital expendituresDepreciate increased book value over remaining useful lifeDisposal of Plant AssetsSaleRetirementExchangeAccounting for DisposalRemove asset cost and related accumulated depreciation from the recordsBook value is cost - accum deprecDetermine gain or loss on disposalGainReceived more than book valueLossReceived less than book valueSales or RetirementsAlways recognize any gain or lossExchangesAlways recognize lossRecognize gain only if exchange of dissimilar assetsIf gain on exchange of similar assetsReduce cost of new asset by gainNatural ResourcesMineral deposits, oil reserves, timber tractsConsumption has a costRecognize depletion by production methodIntangible AssetsLong-term rights that have future valuePatents, R&D, GoodwillConsumption has a costRecognize amortization by straight-line methodAnalyzing InformationAre methods, asset lives, and residual values used reasonable?If methods, lives, or residual values are changed during year, what is impact on net income?If some interest cost was capitalized, what is total interest cost for period?How would this change ratio “Times Interest Earned”?Times Interest EarnedNet income + Income Tax Expense + Total Interest Costdivided byTotal Interest Cost