CHAPTER 8
REPORTING AND INTERPRETING
PROPERTY, PLANT, AND EQUIPMENT;
INTANGIBLES; AND NATURAL RESOURCES
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
UNDERSTANDING THE BUSINESS
Insufficient
capacity results in lost sales.
How much is enough?
Costly excess capacity reduces profits. 8-2
CLASSIFYING LONG-LIVED ASSETS
Actively Used in Operations
Expected to Benefit Future Periods
Tangible
Physical
Substance
Intangible
No Physical
Substance
8-3
CLASSIFYING LONG-LIVED ASSETS
Land
Assets subject to depreciation
Buildings and equipment
Furniture and…show more content… cost.
Estimated
Estimated useful useful life. life.
Estimated
Estimated residual residual value. value. Alternative
Alternative depreciation depreciation methods: methods:
Straight-line
Straight-line
Units-of-production
Units-of-production
Accelerated
Accelerated Method:
Method: Declining
Declining balance balance 8-15
STRAIGHT-LINE METHOD
Depreciation
Expense per Year
=
Cost - Residual Value
Useful Life in Years
At the beginning of the year, Southwest purchased ground equipment for $62,500 cash. The equipment has an estimated useful life of 3 years and an estimated residual value of $2,500.
Depreciation
Expense per Year