Chapter 10

20 terms by munderwood 

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Recording depreciation

Depreciation Expense
Accumulated Depreciation

3 methods of depreciation

1. Straight-line
2. Units of production
3. Declining Balance

Straight-line depreciation formula

cost of asset - salvage value / useful life ( in years )

Book value formula

cost - accumulated depreciation

Units of Production are mostly used for?

equipment and machinery

Units of Production formula

cost of asset - salvage value / useful life ( in units of production)

first step to selling a fixed asset

Get the old asset off the books.
Accumulated Depreciation
Asset

second step to selling a fixed asset

Debit Cash for any cash received
Cash
Accumulated Depreciation
Asset

Third step to selling a fixed asset

Determine if there is a gain or a loss on the sale. (BV vs SP)
Cash
Accumulated Depreciation
Asset
Gain on Sale of Fixed Asset
*Losses have credit balances

Gain on Sale of Fixed Asset has a normal...

Credit balance

Loss on Sale of Fixed Asset has a normal...

Debit balance

Natural resources are ______, not depreciated.

Depleted

Natural Resources- depletion

Depletion expense
Accumulated Depletion
* Use units of production depreciation method!

Intangible Assets are _________, and not depleted.

Amortized

Intangible Assets - Amortization

Amortization Expense
Accumulated Amortization

The Relevant factors in computing depreciation include:

1. Cost
2. Salvage value
3. Useful life
4. Depreciation method

Depreciation:

is the process of allocating to expense the cost of a plant asset

The total cost of an asset less its accumulated depreciation is called:

Book value

A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Units - of - production depreciation

Amortization:

is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.

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