《會計英語第四版》課件單元4

LessonFour:LongTermAssetsAims:1.Toexplaintheimportanceoflongtermassets.2.Todiscussthefixedassetsandtheaccountingtreatment.3.Todiscusstheintangibleassetsandtheaccountingtreatment.4.Toapplythestraight-lineandacceleratemethodsofdepreciation.5.Toapplytheunits-of-productiondepreciationmethod.6.Toapplysum-of-the-years-digitsmethod.7.Toexplainthenatureofintangibleassets.8.Tounderstandtheprocessofamortization.4.1

IntroductiontoLongTermAssetsLongtermassetsaredefinedastherecoursesabusinesspossessesandusestobringforthoryieldrevenueandcanbedividedintotwocategories:plantassetsandintangibleassets.4.2

TheCostofLongTermAssetsThecostoflongtermassetsisrecognizedasanexpenseintheaccountingperiodsinwhichtheyareused.So,ifacomputerisboughtandexpectedtohaveaneconomiclifeof5years,thenthecostofthecomputerwillbeallocationoverthisfive-yearperiod.4.3

TangibleAssetsTangibleassetsarethosewhichonecantouch.Tangibleassetsintheirtermaredividedintothreecategories:

Property,plant,andequipment;Naturalrecoursesand

Land.4.4

IntangibleAssetsIntangibleassetsmayberepresentedbyapieceofpaper,adocument,etc.,buttherealvalueofsuchassetsistherightsandprivilegesextendedtoitsowners.Examplesofintangibleassetscanbepatents,franchise,goodwill,etc..4.5

HistoricalCostofLongTermAssetsAllassetsarerecordedattheirhistoricalcost.Historicalcostusuallyincludesthepurchaseprice,pluswhateveradditionalcostsnecessarytogettheassetandtoprepareitforintendeduse.[2]Additionalcosts(costsbesidesthepurchaseprice)maybetransportationcosts,insurancewhiledeliveringtheasset,etc.4.7

DepreciationWhenanassetiscometohave,itscostisnotexpensedatonceatthemomentofobtainingit.Sincetheassetisusuallyusedforlongperiodoftime,itscostisallocatedovertheusefullife.Thestraight-linemethodsandtheaccelerateddepreciationmethods.4.8

Straight-lineDepreciationProvidedthattherevenuewillremainthesameineachyearoftheassetsuse,itisreasonabletoemploystraight-linedepreciationmethod.4.9

TheEffectsonFinancialStatementsoftheRecognizingofDepreciationExpenseTherecognitionofdepreciationexpenseaffectsthebalancesheetandtheincomestatement,butdoesnotmakeanychangestoTheCashFlowStatements.4.10

TheRetirementandRemovaloftheComputersThefinalstageintheassetusefullifeisitsretirementandremovalfromthecompany’srecords.4.11

TheEffectsonFinancialStatementsunderStraight-lineDepreciationMethodIncome

Statement

2012

2013

2014

2015Revenue$18

000$18

000$18

000$18

000Depreciation

Expense(10

000)(10

000)(10

000)(10

000)Operating

Income$8

000$8

000$8

000$8

000Gain0002

000Net

Income

$8

000

$8

000

$8

000

$10

000

Balance

SheetAssets

Cash$22

000$40

000$58

000$84

000

Computer$46

000$46

000$46

0000

Accumulated

Depreciation(10

000)(20

000)(30

000)0Total

Assets

$58

000

$66

000

$74

000

$84

000

Equity

Contributed

Capital$50

000$50

000$50

000$50

000

Retained

Earnings8

00016

00024

000

34

000Total

Equity

$58

000

$66

000

$74

000

$84

000

Statement

of

Cash

FlowsOperating

ActivitiesInflow

from

Clients

$18

000

$18

000

$18

000

$18

000

Investing

Activities

Outflow

to

Purchase

Computers(46

000)$0$0$0

Inflow

from

Disposal

of

Computers

0

0

0

8

000

Financing

Activities

Inflow

from

Capital

Acquisition

$50

000

0

0

0

Net

Change

in

Cash$22

000$18

000$18

000$26

000Beginning

Cash

Balance$0$22

000$40

000$58

000Ending

Balance

$22

000

$40

000

$58

000

$84

000

4.13

Double-decliningBalanceDepreciationDouble-decliningmethodiscreatedtoreflectrecognitionoflageramountsofdepreciationexpenseintheearlierstagesofanasset’slifeandrespectivelylowerlevelsofexpenseastheassetages.Themethodissometimescalledaccelerateddepreciationmethod.

(1)Figureoutthestraight-linerate.Itisachievedbydividing100%bythenumberofyearstheassetisexpectedtobeinuse.(2)Calculatethedouble-decliningbalanceratebymultiplyingalreadydeterminedstraight-lineratebytwo.(3)Applythedouble-decliningbalanceratetothebook(carrying)valueoftheasset.4.14

AnExampleofDouble-declining

BalanceDepreciationTheschemebelowwillshowthecomputationsofdepreciationexpenseunderdouble-decliningbalancemethod:YearBook

Value

atBeginning

of

Period×Double

theStraight-line

Rate=Annual

Depreciation

ExpenseReal

AnnualDepreciation

Expense2012(46

000-0)×50%=$23

000$23

0002013(46

000-23

000)×50%=$11

500$11

5002014(46

000-34

500)×50%=$5

750$5

5002015(46

000-40

000)×50%=$3

00004.15

TheEffectsonFinancialStatementsunderDouble-decliningBalanceDepreciationMethodLetuspresumethattherevenuealsochangesduringthe4-yearusefullifeandamountsto$31000in2012,$19500in2013,$13500in2014,and$8000in2015.Financialstatementsarepresentedbelow.IncomeStatement

2012

2013

2014

2015Revenue$31

000$19

500$13

500$8

000Depreciation

Expense(23

000)(11

500)(5

500)(0)Operating

Income$8

000$8

000$8

000$8

000Gain

0

0

0

2

000

Net

Income

$8

000

$8

000

$8

000

$10

000

Balance

SheetAssets

Cash$35

000$54

500$68

000$84

000

Computer$46

000$46

000$46

0000

Accumulated

Depreciation(23

000)(34

500)(40

000)0Total

Assets

$58

000

$66

000

$74

000

$84

000

Equity

Contributed

Capital$50

000$50

000$50

000$50

000

Retained

Earnings8

00016

00024

000

34

000Total

Equity

$58

000

$66

000

$74

000

$84

000

Statement

of

Cash

FlowsOperating

ActivitiesInflow

from

Clients

$31

000

$19

500

$13

500

$8

000

Investing

Activities

Outflow

to

Purchase

Computers(46

000)$0$0$0

Inflow

from

Disposal

of

Computers

0

0

0

8

000

Financing

Activities

Inflow

from

Capital

Acquisition

$50

000

0

0

0

Net

Change

in

Cash$35

000$19

500$13

500$16

000Beginning

Cash

Balance$0$35

000$54

500$68

000Ending

Balance

$35

000

$54

500

$68

000

$84

000

4.16

Units-of-ProductionDepreciationThismethodwasdesignedtobettermatchexpenseswithrevenueswhentheformerchangesfromoneyeartoanothergreatly.4.18

Sum-of-the-Years-DigitsDepreciationThismethodisanoptionalonefordouble-decliningmethod,sinceitalsoassumesthatanassetisusedmoreextensivelyduringitsfirstyearsofoperations.Inthismethodaveryimportantplaceisdevotedtothenumberofyearsanassetisexpectedtobeinuse.4.21

WhenaRevisionTakesPlaceSometimesithappensthatarevisionofsalvagevalue,usefullife,ortotalproductiontakeplace.Thenewinformationis