plant assets
DESCRIPTION
PLANT ASSETS. Study Objective. Describe the practice of cost of account to plant assets. The explanation about the depreciation opinion. The computing the depreciation period with different methods. Describe the rule of changing depreciation period. - PowerPoint PPT PresentationTRANSCRIPT
PLANT ASSETSStudy Objective
-Describe the practice of cost of account to plant assets.
-The explanation about the depreciation opinion.
-The computing the depreciation period with different methods.
-Describe the rule of changing depreciation period.
-The difference between income and expense and explain about the transaction for the expense.
-How to compute for asset in stop using of selling.
-Compute the deduction of period natural resource.
-The contrast between the intangible assets and plant assets.
-How are plant assets, natural resource and intangible assets reported and analyzed.
Fixed Assets
Fixed Assets are fixed resource that they are used to operate the
business and are not sold to the customer.
Fixed Assets are divided in to four kinds :
- Land
- Land improvement
- Building
- Equipment Fixed assets are important for the business because :
- Store assets in the condition of a good operation.
- Replace the assets that over the deadline.
- Improve the productivity of resource that we need.
Example of Fixed assets
On January 1 , 2009 Panha Co., Ltd purchased equipment for $13,000 in cash. The equipment has an estimated residual value of $1000.
I. Formula for straight-line:
Straight-line depreciation is the method that allocates the cost of an asset in equal periodic amounts over its useful life.
Cost - Salvage Value = Depreciation cost
$13,00- $1,000 = $12,000
Depreciation cost
Useful life (in year)Annual Depreciation Expense
Straight line depreciation schedule:
IBM Co., Ltd
Computation Ending of year
Depreciation Depreciation Annual Account Bank
Year Cost Rate Depreciat Depreciatio Value
2008 12,000 20% 2,400 2,400 10,600
2009 12,000 20% 2,400 4,800 8,200
2010 12,000 20% 2,400 7,200 5,800
2011 12,000 20% 2,400 9,600 3,400
2012 12,000 20% 2,400 12,200 1,000
II. Units of Activity
Formula for units of activity method:
Units of activity depreciation is a method to allocated the cost of an asset over its useful life based on the relation of its periodic output its total estimated out put.
Depreciation costTotal units of activity
Depreciation cost per units
Depreciation cost per units × Units of activity during the year
= Annual depreciation expense
Units of activity depreciation schedule:
IBM Co., Ltd
Computation Ending of year
Year Units of activity
Depreciation
Per units
Annual Dep.
expense
Annual depreciat.
Book
Value
2008 15,000 0.12 1,800 1,800 11,200
2009 30,000 0.12 3,600 5,400 7,600
2010 20,000 0.12 2,400 7,800 5,200
2011 20,000 0.12 2,400 10,200 2,800
2012 15,000 0.12 1,800 1,200 1,000
III. Declining balance depreciation
Declining balance depreciation is the method that allocates the of an asset over its useful life based on a multiple of the straight line rate of the two times.
Formula for declining balance method:
Book Value at beginning of year × Declining Balance rate
= Annual depreciation Expense
IBM Co., Ltd
Computation Ending of year
Year Book va.
Beg.year
Depreciation
Balance rate
Annual Dep.
expense
Annual dep expense
Book
Value
2008 13,000 40% 5,200 5,200 7,800
2009 7,800 40% 3,120 8,320 4,680
2010 4,680 40% 1,872 10,192 2,808
2011 2,808 40% 1,123 11,315 1,685
2012 1,685 40% 685 12,000 1,000
Declining balance depreciation schedule:
IV- Comparing depreciation methods:
2,000
4,000
6,000
8,000
10,000
12,000
Ann
ual s
trai
ght-
line
dep
reci
atio
n
Life in year
1 2 3 4 5
2,000
6,000
IV- Comparing depreciation methods:
10,000
15,000
20,000
25,000
30,000
35,000
Ann
ual p
rodu
ctio
n de
prec
iati
on
Life in year
1 2 3 4 50
IV- Comparing depreciation methods:
2,000
4,000
6,000
8,000
10,000
12,000
Ann
ual d
ecli
ning
bal
ance
dep
reci
atio
n
Life in year
1 2 3 4 5
14,000
V- Change in Estimates for Depreciation
On January 1, 2009, equipment was purchased that cost $ 60,000
Has a useful life of 10 year and no salvage value. During 2012, the useful life was revised to 8 year total (5 year remaining).
Asset Cost $60,000
Accumulated depreciation 12,31,2010
($60,000 × 3 year) $18,000
Remaining book value $42,000
Divide by remain life 5
Revised annual depreciation 8,400
Dec 31 Depreciation expense $ 8,400
Accumulated depreciation equipment $8,400
Natural Resources:
Cost determination and Depletion:
Total cost – Salvage Value
Total estimated Units
Depletion cost per unit × Number of Units Extracted and sold
= Annual Depletion Expense
= Depletion cost per unit
Robert Co., Ltd acquired a tract of land containing ore deposits. Total costs of acquisition and development were $100,000 and Robert estimates the land contained 40,000 tons of ore. During the first year of operations Robert extract and sold 13,000 tons of ore.
$1,000,000 – $0
40,000 tons
= $125 per ton
Depletion Expense = $125 per ton × 13,000 = $325,000