F3M6 Flashcards
How do you know when to depreciate versus amortize
tangible - depreciate
intangible - amortize
Component depreciation
separate depreciation of each significant part
Composite/group depreciation
averaging the economic life of the number of PPE (yearly dep/total dep)
Disposal of group asset
use a/d as plug
Straight Line Depreciation
service potential declines with time
Depreciable base st
cost - salvage value
Sum of years depreciation
accelerated method
Front end loaded
add up all years for denom
num is # of years left
Units of Production Depreciation
converts depreciation to a variable cost
declining balance depreciation
rapid obsolesnse
Salvage ignored until the end
2/n
Partial Year Depreciation
half year convention
depreciating fully in first year none in last and vice versa all ok
disosal of a single depreciable asset
Dr. Cash
Dr. A/D
Cr. Asset
Cr. Gain
Writing off asset
Dr. A/D
Cr. Old asset
Total and permanent impairment
Dr. A/D
Dr. Loss to impairment
Cr. Asset
Depletion is for
natural resources
Method of Depletion
cost (GAAP)
Percentage (tax purposes only)
What is included in cost of depletion
purchase price, development cost, restoration costs less residual value
Calculate Depletion
unit rate * number extracted
Depletion base/estimated recoverable units
