EXAM #3 Flashcards
what is cost
whatever it takes to get the fixed asset property plant equipment into service and operational. inspection, incidentals, etc.
what is depreciation expense
the expensing, the using of property plant equipment
accumulated depreciation
the balance sheet side, accumulation of balance. use this when combined to OG cost to calculate NBV.
useful life
estimate the fixed asset will last for
salvage value
estimate it will be worth at the end of useful life
net book value (NBV)
original cost minus the accumulated depreciation
EXPENSE ENTRY
Debit: Depreciation expense & Credit: Accumulated Depreciation
Disposal of or sell asset
reversing the books, Debit: to cash, accum dep, loss and Credit: Gain, equipment [CASH MAY BE 0, Gain or loss not both]
( DISPOSAL OR SELL OF ASSET) If you have an asset (equipment) with the following values
Cost - $10,000
Accum Dep - $7,000
Sold for $5,000
What is gain/loss be? The entry?
- NBV? $7,000-$5,000= $3,000
- Sold for $5,000- NBV of $3,000
- Debit Cash - $5,000
Debit Acc Dep: $7,000
Credit : Equipment $10,000
Credit: Gain $2,000
What is the straight-line depreciation formula? depreciation expense is same every year
(Cost-salvage value)
____________________= Annual Depr.
Useful Life
what is the unit of production depreciation formula?
(Cost - Salvage Value)
______________________ = Depr. Rate -> Rate x Actual Units = Dep.
Estimated Units
What is the double declining depreciation formula?
(Cost - beg. Acc Dep)
_____________________ X 2 = Annual dep. Expense
Useful Life
What are known liabilities
those that we are confident (maybe paper) we know what we owe, can estimate
What are unknown liabilities
contingent
when do you record liability on balance sheet
when it’s PROBABLE AND ESTIMABLE
