Acc 291 Week 2 Dqs and Participation Questions Essay
880 WordsNov 28, 20124 Pages
Week 2 DQs and Participation Questions
Week 2 Discussion Question #1
What are the differences among valuation, depreciation, amortization, and depletion? Is it appropriate to calculate depreciation using two different methods? Why?
Which depreciation method provides you the highest depreciation expense in the first year? Why?
Valuation refers to the asset being recorded and disclosed at current market price regardless of whether that price is above or below cost. Depreciation is the allocation of the cost of a plant asset to expense over its useful or service life in a rational and systematic manner. There are three methods that can be used for depreciation and a company must pick which method they want to use and stick with that…show more content…
When the contractual interest rate and the market interest rate are the same, the bonds are sold at face value. But when the contractual interest rate and the market interest rates differ then the bonds are usually sold below or above face value. If the market rate of interest is lower than the contractual interest rate then the investors will have to pay more than the face value for the bonds (premium). When a company issues 12% bonds at a time when other bonds of similar risk are paying 15%. Most investors will be more interested in buying the 12% bonds and their value will fall below their face value, which is called selling at a discount.
A company should comply with the matching principle, which shows that bond discounts should be allocated systematically to each accounting period benefiting from the use of cash proceeds. The straight-line method of amortization of bond discount allocates the same amount to interest expense each interest period. By using this formula: Bond Discount divided by Number of Interest Periods equals Bond Discount Amortization.
Amy did a good job explaining the contractual rate which is the rate in which the interest payments are calculated. How do we gauge our return on our investment, what comprises that rate, and what can affect that/
Week 2 Question for Participation #1
What types of industries have unearned revenue? Why is unearned revenue considered a liability? When is