century 21 accounting © 2009 south-western, cengage learning lesson 18-1 buying plant assets and...
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 18-1 CALCULATING AND PAYING PROPERTY TAX page 536 February 1. Classic Parts, Inc., paid cash for property tax, $ Check No. 69. Annual Property Tax =Tax Rate× Assessed Value $720.00=1.2%×$60,000.00TRANSCRIPT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-1
Buying Plant Assets and Paying Property Tax
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-1
RECORDING THE BUYING OF A PLANT ASSET
1 23
page 535
January 3, 20X1. Paid cash for a display case, $3,250.00. Check No. 4.
3. Cash paid
4
2. Cost of the plant asset1. Account title
4. Post
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-1
CALCULATING AND PAYING PROPERTY TAX page 536
February 1. Classic Parts, Inc., paid cash for property tax, $720.00. Check No. 69.
AnnualProperty Tax=Tax Rate×Assessed
Value$720.00=1.2%×$60,000.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-1
TERMS REVIEW
real property personal property assessed value
page 537
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-2
Calculating Depreciation Expense
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-2
EstimatedSalvage Value
OriginalCost
Estimated TotalDepreciation
Expense=–
$3,000.00
AnnualDepreciation
Expense=Years of Estimated
Useful Life÷
Estimated TotalDepreciation
Expense$600.00
$250.00$3,250.00
STRAIGHT-LINE DEPRECIATION
Calculating Annual Depreciation Expense
1
page 538
=–
=5÷$3,000.00
1. Subtract the asset’s estimated salvage value from the original cost.2. Divide the estimated total depreciation expense by the years of
estimated useful life.
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-2
Months ina Year
AnnualDepreciation
Expense
MonthlyDepreciation
Expense=÷
$50.00
Partial Year’sDepreciation
Expense=Number of Months
Asset Is Used×
MonthlyDepreciation
Expense$250.00
12$600.00
CALCULATING DEPRECIATION EXPENSE FOR PART OF A YEAR
Calculating Partial Year’s Depreciation Expense
1
page 539
=÷
=5×$50.00
1. Divide the annual depreciation expense by 12.2. Multiply the monthly depreciation expense by the number of
months the plant asset is used in a year.
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-2
CALCULATING ACCUMULATED DEPRECIATION page 540
20X3 Depreciation
Expense
20X2 AccumulatedDepreciation
20X3 AccumulatedDepreciation
=+
$1,800.00$600.00$1,200.00 =+
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-2
CALCULATING BOOK VALUE page 540
AccumulatedDepreciation
OriginalCost
Ending Book Value
=–
$1,450.00$1,800.00$3,250.00 =–
AnnualDepreciation
BeginningBook Value
Ending Book Value
=–
$1,450.00$600.00$2,050.00 =–
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-3
Journalizing Depreciation Expense
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-3
3. Each year the asset is owned, record the year’s annual depreciation expense in Section 3. Calculate and record accumulated depreciation and ending book value.
PREPARING PLANT ASSET RECORDS
1
2
3
page 542
2. Do not write in Section 2 until the asset is disposed of.
1. Write the information in Section 1 when the asset is purchased.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-3
JOURNALIZING ANNUAL DEPRECIATION EXPENSE page 543
3. Record adjusting entry2. Accumulated Depreciation credit1. Depreciation Expense debit
13
3
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-3
POSTING AN ADJUSTING ENTRY FOR DEPRECIATION EXPENSE
1. Debit Depreciation Expense.
page 544
2. Credit Accumulated Depreciation.
12
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-3
TERM REVIEW
plant asset record
page 545
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
Disposing of Plant Assets
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-4
SALE OF A PLANT ASSET FOR BOOK VALUE
1. Record an entry in the cash receipts journal to remove the original cost.
page 546
January 6, 20X6. Received cash from sale of display case, $250.00: original cost, $3,250.00; total accumulated depreciation through December 31, 20X5, $3,000.00. Receipt No. 4.
2. Check the type of disposal, and write the date, and disposal amount in Section 2 of the plant asset record.
1
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-4
RECORDING A PLANT ASSET’S DEPRECIATION EXPENSE FOR A PARTIAL YEAR page 547
April 4, 20X7. Recorded a partial year’s depreciation on a safe to be sold, $60.00. Memorandum No. 31.
1. Debit the depreciation expense account.2. Credit the accumulated depreciation account.3. Update Section 3 of the plant asset record.
12
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-4
SALE OF A PLANT ASSET FOR MORE THAN BOOK VALUE
1. Remove the original cost. Record the gain on the sale. Record the cash received from the sale.
page 548
April 4, 20X7. Received cash from sale of safe, $425.00: original cost, $1,800.00; accumulated depreciation through April 4, 20X7, $1,500.00. Receipt No. 47.
2. Check the type of disposal. Write the date and disposal amount in Section 2 of the plant asset record.
1
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-4
1. Remove the original cost. Record the loss on the sale. Record the cash received from the sale.
SALE OF A PLANT ASSET FOR LESS THAN BOOK VALUE
1
page 549
October 6, 20X7. Received cash from sale of a computer, $150.00: original cost, $1,900.00; total accumulated depreciation through October 1, 20X7, $1,500.00. Receipt No. 281.
2. Check the type of disposal and write the date and disposal amount in Section 2.
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-4
TERMS REVIEW
gain on plant assets loss on plant assets
page 550
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-5
Declining-Balance Method of Depreciation
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-5
CALCULATING DEPRECIATION USING THE DOUBLE DECLINING-BALANCE METHOD
12 3
page 551
4
1. Calculate the double declining-balance rate.2. Determine the annual depreciation expense.3. Determine the ending book value.
4. Transfer the ending book value to the beginning book value for the following year.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-5
CALCULATING THE LAST YEAR’S DEPRECIATION EXPENSE
2 3
page 552
1. Transfer the ending book value from Year 4 to the beginning book value of Year 5.
2. Subtract the salvage value from the beginning book value to determine the depreciation expense for the last year.
3. Verify that the ending book value is equal to the salvage value.
1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 18-5
COMPARISON OF TWO METHODS OF DEPRECIATION page 553
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LESSON 18-5
TERM REVIEW
declining-balance method of depreciation
page 554