Intermediate Accounting 10 Property, Plant, and Equipment：Cost Allocation and Impairment5696.doc

Intermediate Accounting 10 Property, Plant, and Equipment:Cost Allocation and Impairment5696
Property, Plant, and Equipment:
Cost Allocation and Impairment
Chapter
10
Depreciation, Impairments
Depreciation
Factors involved
Methods of depreciation
Special methods
Special issues
Impairments
Presentation and Analysis
Recognizing impairments
Measuring Impairments
Restoration of loss
Assets to be disposed of
Presentation
Analysis
Depreciation - Method of Cost Allocation
Allocating costs of long-term assets:
Fixed assets = Depreciation expense
Intangibles = Amortization expense
Natural resources = Depletion expense
Depreciation is the accounting process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset1>.
LO 1 Explain the concept of depreciation.
Depreciation - Method of Cost Allocation
LO 2 Identify the factors involved in the depreciation process.
Three basic questions:
Factors Involved in the Depreciation Process
What depreciable base is to be used?
What is the asset’s useful life?
What method of cost allocation is best?
Depreciation - Method of Cost Allocation
LO pare activity, straight-line, and decreasing-charge methods of depreciation.
The profession requires the method employed be “systematic and rational.” Examples include:
Methods of Depreciation
Activity method (units of use or production).
Straight-line method.
Sum-of-the-years’-digits.
Declining-balance method.
Group posite methods.
Hybrid bination methods.
Accelerated methods
Special methods
Depreciation - Method of Cost Allocation
LO pare activity, straight-line, and decreasing-charge methods of depreciation.
Exercise (putations—Four Methods) Robert Parish Corporation purchased a new machine for its assembly process on September 30, 2007. The cost of this machine was $117,900. pany estimated that the machine would have a salvage value of $12,900 at the end o