Class Notes 10/18 and what to expect on Exam 3
Class Notes 10/18 and what to expect on Exam 3 acct 2110
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This 3 page Class Notes was uploaded by jemialk on Tuesday October 18, 2016. The Class Notes belongs to acct 2110 at Auburn University taught by Cornett in Fall 2016. Since its upload, it has received 3 views. For similar materials see Accounting in Accounting at Auburn University.
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Date Created: 10/18/16
Class Notes 10/18 Monday, September 26, 2016 12:39 PM Chapter 7: Operating Assets Class will cover: Remainder of Chapter 7 and review what to expect Exam 3 Property, Plant, & Equipment Depreciation Intangibles Amortization Natural Resources Depletion Review of Disposal of Assets from previous class Net Book Value vs. "Boot" Net Book Value = Cost ‐ Accumulated Depreciation Boot is what we get on disposal Example Problem ‐ something similar will be on test ‐ OPEN FORMAT Recording Disposal On September 13, 2016, Dunder Mifflin, Inc. sold a delivery vehicle used in its operations for $30,000. hicle was originally purchased for $42,000 and has accumulated depreciation of $14,400. (Assume the adjustment to bring depreciation up to date has already happened.) Prepare the journal entry to record the disposal and subsequent gain or loss. Net Book Value = $42,000‐$14,400=$27,600.00 Boot = $30,000 Boot ‐ Net Book Value = $30,000‐$27,600=$2,400.00 GAIN on Disposal = $2,400 9/13/2016 Cash 30,000 Accumulated Depreciation 14,400 Vehicle 42,000 Gain on Sale 2,400 TOTAL 44,400 44,400 Iclicker 2 ‐ quiz question A fixed asset has a historical cost of $20,000, a net book value of $12,000 and a salvage value of $2,500. What is the gain or loss on disposal of the fixed asset if it is sold for $15,000? Boot ‐ NBV = 15,000‐12,000=3,000 gain on disposal Mrs. C loves ratios, but won't be testing on them for this exam. Begin slideshow review with slide 33 Amortization ‐ how do we allocate the cost of the intangible over the life of the intangible A long life to an accountant is a life longer than 1 year or 1 accounting period Most of the time, the full life of the patent is not figured, because technology changes and so on. The heaviest period of time the company benefits from the patent is guessed and that number is used. Research and Development is not always recoverable, so it is expensed, not capitalized Goodwill only matters when a business is being bought by another ○ Company A doesn't review its own goodwill, but it will review goodwill of Company B that Company A bought 2 years ago Iclicker quiz ‐ amortization question James Company purchased a patent with a legal life of 20 years for $250,000 at the beginning of 2012. The useful life of the patent was estimated to be 10 years. 1) What amount should be recorded as amortization expense in 2012? Cost / Useful Life 250,000/10=25,000 2) What is the book value of the patent at the end of 2011? Patent 250,000 25,000 _______ _______ 225,000 $225,000 Debit Balance Back to slideshow (38) Depletion rate = (Cost ‐ Residual Value) / Recoverable Units Exercise 7‐65 ‐ Recording Depletion Oxford Quarries purchased 45 acres of land for $185,000. The land contained stone that the company will remove from the ground, finish, and sell as facing for buildings. Oxford spent $435,000 preparing the quarry for operation. Oxford estimates the quarry contains 55,000 tons of usable stone that will take 6 years remove. Upon completion of quarrying, Oxford estimates the land will have a residual value of $11,150. During 2013, Oxford extracted 8,500 tons of stone. (Cost ‐ Residual Value)/Recoverable Units (620,000‐11,500)/55000=11.0636 2013 Adjustment to record extraction of 8,500 tons of stone 8,500*11.0636=94,040.6 Inventory 94,040.60 Accumulated Depletion 94,040.60 Exam 3 Review Sunday, October 16, 20164:54 PM Covers Chapters 6 & 7 Helpful Resources and Other Information No ratios Open Format ○ Depreciation & Disposals ○ FIFO, LIFO, & Average Cost Flows under PERIODIC SYSTEM Multiple Choice ○ Will contain Perpetual System question
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