group present

8/8/2019 Group Present

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Fixed Asset and

Intangibles


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Group Members

Phan Anh T

V Thnh T Nguyn Vn Anh Tun

Trn Nguyn Hong Uyn

Phm Hu Thu Vn

Nguyn H Thy Vi

L Quang Vinh

Lecturer : Nguyn Vit Thng


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I. The Overview of Fixed Asset

II. Depreciation

III. Fixed Asset Account


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I. The

Overview of

Fixed Asset

Economic benefit in future

Reliable Original Cost

Useful Life over 1 year

Suitable current regulation

Definition


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Tangible Assets

A physical or material existence

A limited lifetime


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Types of Fixed Assets


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Definition

Depreciation is the allocation of the OriginalCost of a Fixed Asset to different Business

period.

Land cant not be depreciated


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Causes ofDepreciation

Obsolescence

Physical Depreciation

Depletion

Passage of time


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Factors of

Depreciation Expense

The Original Cost of the Fixed Asset

The Expected Useful Life of the Fixed Asset

The Estimated Value of the Fixed Asset at

the end of its Useful Life


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The Original Cost

The cost to

purc

hase the FixedAsset along with

any amounts of

expenditure to getit ready to use.


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Fixed Asset Capitalized costs

Land

- Purchase price, commissions, mortgages/taxes assumed,

preparing land to build on (clearing, grading, tearing down old

building, etc.), landscaping

- NOT subject to depreciation

Land

improvements

- Driveways, parking lots, fences;

- They can be depreciated

Buildings

- Architectural fees, building permits, contractors charges, cost

of material, labor for constructed buildings, and cost of repairs

for existing buildings.

- Subject to depreciation.

Machinery and

Equipment

- Purchase price, taxes, freight, and installation and testing the

equipment.

- Sub ect to de reciation.


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Exception some

costs

Vandalism Mistakes in installing

Uninsured theft loss

Damage during

unpacking and installing


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The Expected

Useful Life The time we estimate it

join in the production

A Fixed Asset may have

A physical life

An economic life


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Original

Cost

Residual Value

T

heE

stimated Value at the end of aFixed Asset's Useful Life

Receiving from the disposal ofFixed Asset


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StraightLine Depreciation Method

Declining Balance Depreciation Method

Units of Output Depreciation Method


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Straight-Line method

- Generate revenues

(useful life) and willexpense a portion of

the Original Cost in

equal interests over

that period


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Straight-Line method

Straight-Line formula:

Cost of Fixed AssetResidual value

Useful life (Years )

= Annual depreciation Expense


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A vehicle that depreciates over 5 years, is

purchased at a cost of$17,000, and have

a Residual Value of$2000, will depreciateat $3,000 per year

Book Value at

beginning of year

Depreciation

Expense

Accumulated

Depreciation

Book Value at

end of year

$17,000 (Original Cost) $3,000 $3,000 $14,000

$14,000 $3,000 $6,000 $11,000

$11,000 $3,000 $9,000 $8,000

$8,000 $3,000 $12,000 $5,000

$5,000 $3,000 $15,000 $2,000 (scrap value)


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Declining-Balance Method


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Declining-Balance Formula

Declining-Balance Rate = Straight-line Depreciation Rate

X Adjustment coefficient

Annual Depreciation Expense = Book value at beginning

of year X Declining-balance Rate


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Straight-Line =

Depreciation rate (%)

1

Useful Life of

Fixed Assets

X 100


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Useful Life of Fixed Assets Adjustmentcoefficient(Times)

To 4 years 1,5Over4 to 6 years 2,0

Over6 years 2,5


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A machinery with $1,000 Original Cost, $100

Residual Value, and 5 years Useful Life.

Straight-LineDepreciation Rate =(1/5) x100=20% per year

Declining-Balance Rate = Straight-Line depreciation rate

x 2 = 40%

Annual Depreciation Expense = value at beginning of year

x 40%


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A machinery with $1,000 Original Cost, $100

Residual Value, and 5 years Useful Life.

Book Value at

beginning of year

Depreciation

Rate

Depreciation

Expense

Accumulated

Depreciation

Book Value at

end of year

$1,000 (Original Cost) 40% $400 $400 $600

$600 40% $240 $640 $360

$360 40% $144 $784 $216

$216 40% $86.40 $870.40 $129.60

$129.6

0$29

.6

0 $900 $100 (scrap value)


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Units-of-Production Method


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Units-of-Production Formula

Depreciation per Unit = (Total Cost Residual

Value) / Total estimated units-of-production

Depreciation expense = Depreciation per Unit x

Units produced in period

Units-of-Production Method


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BB Company bought a machine with cost $15,000,

useful life is 5; Residual Value is $3000. The

machine is expected to produce a total of 40,000units of production

Depreciation per Unit = ($15,000 - $3000)/40,000= $0.30/unit

Depreciation expense in 2004 = $0.30x 8,000= $2,400


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BB Company bought a machine with cost $15,000,

useful life is 5; Residual Value is $3000. The

machine is expected to produce a total of 40,000units of production

Year

The Units of

production

Depreciation

perUnit

Depreciation

Expense

Accumulated

Depreciation

Net Book

Value

$15,000

2004 8,000 $0.30 $2,400 $2,400 $12,600

2005 12,000 $0.30 $3,600 $6,000 $9,000

2006 3,500 $0.30 $1,050 $7,050 $7,950

2007 14,500 $0.30 $4,350 $11,400 $3,600

2008 2,000 $0.30 $600 $12,000 $3,000

Total 40,000 $12,000


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III. Fixed Asset

Account


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Account for the Disposal ofFixed Assets

Disposal

Objec

tives

To avoid continuing carrying/

inventory cost

To make available space for

agency

To prevent further

deterioration in case of sale


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Disposal


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Selling Fixed Assets

Sale Price = Book Value

Sale Price < Book Value

Sale Price > Book Value

No Loss

No Gain

Loss

Gain


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Account for NaturalResources

Depletion is the processtransferring of the cost of

natural resources to an

expense account

Accounted by using the

Unit-of-Product Method


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Account for IntangibleAssets

Amortization is the processallocating the costs of

Intangible Assets to expense

over their useful life

Accounted base on

Straight-Line Method


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Patent


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Copyright

Exclusive right

granted to sell aliterary, artistic or

musical composition

Maximum life 70

years


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ThankYou

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