Supplement I

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Supplement I Fixed asset and Depreciati on Methods 固固固固固固固固固

description

Supplement I. Fixed asset and Depreciation Methods 固定资产和折旧方法. Classification of Assets. Current Assets( 流动资产 ) are assets which can be converted into Cash or consumed within one year or the normal Operating cycle of the business. Fixed Assets ( 固定资产 )or long-term assets ,refer to - PowerPoint PPT Presentation

Transcript of Supplement I

Page 1: Supplement I

Supplement I

Fixed asset and Depreciation Methods

固定资产和折旧方法

Page 2: Supplement I

Classification of Assets

Current Assets( 流动资产 ) are assets which can be converted into Cash or consumed within one year or the

normal Operating cycle of the business

Current Assets( 流动资产 ) are assets which can be converted into Cash or consumed within one year or the

normal Operating cycle of the business

Fixed Assets ( 固定资产 )or long-term assets ,refer to those relatively long-lived assets which are held by a

business for use in its operation

Fixed Assets ( 固定资产 )or long-term assets ,refer to those relatively long-lived assets which are held by a

business for use in its operation

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L an d , b u ild in g s ,eq u ip m en t,

fu rn itu re , fixtu res .

L on g -te rmasse ts h avin g

p h ys ica l su b s tan ce .

Tangible PlantAssets

P aten ts , cop yrig h ts ,trad em arks ,

fran ch ises , g ood w ill.

N on cu rren t asse tsw ith n o p h ys ica l

su b s tan ce .

IntangibleAssets

O il reserves ,t im b er, o th er

m in era ls .

S ites acq u ired fo rextrac tin g va lu ab le

resou rces .

NaturalResources

Major Categories of Fixed Assets

Major Categories of Fixed Assets

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Depreciation Method of Plant Asset

Straight-line method

直线法Sum- of-the- years’-digits method

年数总和法Double-declining-balance Method

双倍余额递减法

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Book Value帐面净值 Cost - Accumulated Depreciation Accumulated Depreciation累计折旧 Represents the portion of an asset’s cost that has already been allocated

to expense.

Book value of last year =salvage value

Book Value帐面净值 Cost - Accumulated Depreciation Accumulated Depreciation累计折旧 Represents the portion of an asset’s cost that has already been allocated

to expense.

Book value of last year =salvage value

DepreciationDepreciation

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Sum-of-the-Years’-Digits Method

Sum-of-the-Years’-Digits Method

Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

the years in reverse order The sum of number of years

the years in reverse order The sum of number of years

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Sum-of-the-Year-DigitsExample

Sum-of-the-Year-DigitsExample

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the Sum-of-Years-Digits method.

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the Sum-of-Years-Digits method.

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On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the Sum-of-the-Year-Digits method.

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the Sum-of-the-Year-Digits method.

Sum-of-the-Year-DigitsExample

Sum-of-the-Year-DigitsExample

2005 Dep expense=( Cost - Residual Value )*Dep Rate of 2005=(24000-3000)*5/15=7000

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Sum-of-the-Year-DigitsExample

Sum-of-the-Year-DigitsExample

Compute depreciation for the rest of the boat’s estimated useful life.

Compute depreciation for the rest of the boat’s estimated useful life.

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Sum-of-the-Years-Digits BalanceGraph of Depreciation Expense

Sum-of-the-Years-Digits BalanceGraph of Depreciation Expense

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Accelerated Method

• Example on textbook ,p78

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Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

The double-declining balance accelerated depreciation rate is 200% of the straight-

line depreciation rate of 1/Useful Life.

The double-declining balance accelerated depreciation rate is 200% of the straight-

line depreciation rate of 1/Useful Life.

Double-Declining BalanceExample

Double-Declining BalanceExample

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Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

Depreciation in the early years of an asset’s estimated useful life is higher than in later years.

The book value at the beginning of the year The book value at the beginning of the year

Double-Declining BalanceExample

Double-Declining BalanceExample

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Double-Declining BalanceExample

Double-Declining BalanceExample

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the double-declining balance method.

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the double-declining balance method.

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Double-Declining BalanceExample

Double-Declining BalanceExample

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the double-declining balance method.

On January 1, 2005, Bass Co. buys a new boat. Bass Co. pays $24,000 for the boat. The boat has an

estimated residual value of $3,000 and an estimated useful life of 5 years.

Compute depreciation for 2005 using the double-declining balance method.

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Double-Declining BalanceExample

Double-Declining BalanceExample

Compute depreciation for the rest of the boat’s estimated useful life.

Compute depreciation for the rest of the boat’s estimated useful life.

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Double-Declining BalanceExample

Double-Declining BalanceExample

Compute depreciation for the rest of the boat’s estimated useful life.

Compute depreciation for the rest of the boat’s estimated useful life.

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Double-Declining BalanceExample

Double-Declining BalanceExample

Compute depreciation for the rest of the boat’s estimated useful life.

Compute depreciation for the rest of the boat’s estimated useful life.

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Double-Declining BalanceExample

Double-Declining BalanceExample

Total depreciation over the estimated useful life of an asset is the same using either the straight-line method or

the declining-balance method.

Total depreciation over the estimated useful life of an asset is the same using either the straight-line method or

the declining-balance method.

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Double-Declining BalanceGraph of Depreciation ExpenseDouble-Declining Balance

Graph of Depreciation Expense

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Accelerated Method

• Example on textbook,p79

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Double-Declining BalanceExample

Double-Declining BalanceExample

Compute depreciation for the equipment. Compute depreciation for the equipment.

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Double-Declining BalanceExample

Double-Declining BalanceExample

Compute depreciation for the equipment. Compute depreciation for the equipment.

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Exercise

• Jon Seceda furnace Corp. purchased machinery for $ 50,000 at the beginning of the year 1.It is estimated that it will have a useful life of 5 years , residual value of $5000.compute the depreciation under the each of the following method (round to two decimal places)

• Sum-of-years’-digits• Double-declining balance

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Sum-of-the-Year-DigitsExample

Sum-of-the-Year-DigitsExample

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Double-Declining BalanceExample

Double-Declining BalanceExample

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Exercise

• Jon SECEDA furnace corp. purchased machinery for $315,000 on April 1,2004. It is estimated that it will have a useful life of 10 years , scrap value of $ 15000

• From the information given , compute the depreciation charge in 2004 under each of the following method( round to three decimal places)

• straight-line • sum-of-years’-digits• Double-decline balance

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Exercise

• [(315000-15000) ×1/10] ×9/12=22500

• [(315000-15000)×10/55]×9/12=40909.09

• [(315000×2/10] ×9/12=47250

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Book Value帐面净值 Market Value/ fair Value

市场价值 / 公允价值 the price which the assets are

exchanged in the market

Book Value =Market Value

Book Value帐面净值 Market Value/ fair Value

市场价值 / 公允价值 the price which the assets are

exchanged in the market

Book Value =Market Value

DepreciationDepreciation

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assignment

Problems 2 ( p 81)

Problems 1 ( p 80)