武汉理工大学：《会计学》课程教学课件（英文）07 Noncurrent Assets and Depreciation

Slide9-1Chapter7Noncurrent Assets and Depreciation

Slide 9-1 Chapter 7 Noncurrent Assets and Depreciation

Slide9-2Plant AssetsLong-lived assets acquired for use inbusinessoperationsSimilartolong-termprepaid expensesDateDescriptionDebitCreditAsyearspass,and theThe cost of plant assetsservices are used,theis theadvance purchasecostis transferredtoofservicesdepreciationexpense

Slide 9-2 Plant Assets Long-lived assets acquired for use in business operations. Similar to long-term prepaid expenses The cost of plant assets is the advance purchase of services. Date Description Debit Credit As years pass, and the services are used, the cost is transferred to depreciation expense

Slide9-3Major Categories of Plant AssetsNaturalTangible PlantIntangibleAssetsAssetsResourcesLong-termNoncurrentassetsSites acquired forwithnophysicalextracting valuableassets havingphysicalsubstancesubstanceresources.Land, buildingsOil reserves,Patents,copyrightstimber, otherequipmenttrademarksfurniture,fixturesfranchises, goodwillminerals

Slide 9-3 Land, buildings, equipment, furniture, fixtures. Long-term assets having physical substance. Tangible Plant Assets Patents, copyrights, trademarks, franchises, goodwill. Noncurrent assets with no physical substance. Intangible Assets Oil reserves, timber, other minerals. Sites acquired for extracting valuable resources. Natural Resources Major Categories of Plant Assets

Slide9-4Accountable EventsEAcquisitionEAllocation of theacquisitioncosttoexpenseovertheasset's useful life(depreciation)Sale or disposal

Slide 9-4 Accountable Events ÊAcquisition. ËAllocation of the acquisition cost to expense over the asset’s useful life (depreciation). Ì Sale or disposal

Slide9-5Acquisition and Valuation of PP&EValued at Historical Cost,reasons include:At acquisition,cost reflects fair valueHistorical cost is reliableCompanies should not anticipate gains and losses butshould recognize gains and losses only when theassetis sold

Slide 9-5 At acquisition, cost reflects fair value. Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. Valued at Historical Cost, reasons include: Acquisition and Valuation of PP&E

Slide9-6Acquisition of Plant AssetsAssetpriceCostReasonableandnecessary costs.forgetting..forgettingthe asset to thethe asset readyfor use.desired location

Slide 9-6 Acquisition of Plant Assets Asset price Reasonable and necessary costs . . . . . . for getting the asset to the desired location. . . . for getting the asset ready for use. Cost

Slide9-7CostDeterminingExample$52,000List price4,160Salestax @ 8%500Transportation cost1,300Set-upTesting4,000$61.960Total costto HeatCo.DateDebitCreditDescriptionPrepare the journal entry

Slide 9-7 Determining Cost Example List price $ 52,000 Sales tax @ 8% 4,160 Transportation cost 500 Set-up 1,300 Testing 4,000 Total cost to Heat Co. $ 61,960 Date Description Debit Credit Prepare the journal entry

Slidee09-8CostDeterminingExample$52,000List price4,160Salestax @ 8%500Transportation cost1,300Set-upTesting4,000$61.960Total costto HeatCoDateDebitCreditDescription4-May61,960NewMachineCash61,960

Slide 9-8 Determining Cost Example List price $ 52,000 Sales tax @ 8% 4,160 Transportation cost 500 Set-up 1,300 Testing 4,000 Total cost to Heat Co. $ 61,960 Date Description Debit Credit 4-May New Machine 61,960 Cash 61,960

Slide9-9DepreciationThe allocation of the cost of aplant asset to expense in theperiods in which services are received from the asset.BalanceSheetCostofAssets:Plant andplantassetsequipmentastheservicesIncomeStatementare receivedRevenues:Expenses:Depreciation

Slide 9-9 Depreciation The allocation of the cost of a plant asset to expense in the periods in which services are received from the asset. Cost of plant assets Balance Sheet Assets: Plant and equipment Income Statement Revenues: Expenses: Depreciation as the services are received

Slide9-10Depreciationa Book ValueI Cost - Accumulated Depreciationa Accumulated DepreciationContra-assetRepresents the portion of anasset's cost that has alreadybeen allocated to expense.aCausesof DepreciationI Physical deteriorationObsolescence

Slide 9-10 ä Book Value l Cost - Accumulated Depreciation ä Accumulated Depreciation l Contra-asset l Represents the portion of an asset’s cost that has already been allocated to expense. ä Causes of Depreciation l Physical deterioration l Obsolescence Depreciation