Fsa-Homework5-7

ASC 360-10 provides guidance on accounting for property, plant, and equipment, and the related accumulated depreciation on those assets. This Subtopic also includes guidance on the impairment or disposal of long-lived assets. ASC 360-10 notes that long-lived tangible assets include land and land improvements, buildings, machinery and equipment, and furniture and fixtures.

11. Investors and creditors are particularly interested in this financial statement because it tells them what is happening to the company’s most important resource?

c. Depreciation is computed using the straight-line method over the asset’s estimated useful life, which is determined by asset category as follows: Buildings and improvements (5 – 40 years); Store fixtures and equipment (3 – 15years), Leasehold improvements (Shorter of initial lease term or asset life); Capitalized software (3 – 7 years).

| In Year 1, depreciation is $5,000 plus 15% of the asset’s outlayFrom Year 2, depreciation is either * 30% of the asset’s book value; or * if the asset’s book value is less than $6,500, depreciation is the asset’s book value (i.e. asset is depreciated to zero once book value < $6,500)

of the asset (asset group) at the date it is tested for recoverability, whether in use (see paragraph 360-

Capital assets that can be deprecated must be, either by straight-line depreciation or the composite method (weighted average) of depreciation.

The equipment can be depreciated by one of two methods: Section 179 allows for a full write off in the year of acquisition (subject to certain limits). MACRS depreciation allows a systematic write off of equipment based on the type of asset. More business assets are either 5 year or 7 year property (CompleteTax, 2012).

-The estimated depreciation lives on certain U.S. plants, machinery and equipment changed. The economic life of these assets was increased, so the depreciation expense was lowered.

* Expected that the asset will be sold or disposed of before the end of its estimated useful life

The estimated years of useful lives of company property and equipment are as follows: buildings 5-45 years, furniture/fixtures/equipment 3-20 years, and leasehold improvements 5-45 years.

On the other hand, Telstra’s property, plant and equipment, including buildings and leasehold property but excluding freehold land, are depreciated on a straight line basis to the income statement over their estimated service lives. Assets start depreciating when they are installed and ready for use. For Telstra, its building is estimated to have useful life of 31 to 52 years, data core network has useful life of 4 to 10 years while IT equipment has useful

Depreciation is the reduction in the value of certain fixed assets. It is a periodic reduction of fixed assets, usually done every year. Fixed assets are assets that add value to the company. Examples of fixed assets that can be depreciated are vehicles, buildings, machinery, equipment and fixture and fittings. The only fixed asset that is not depreciated is land, because it is not worn-out overtime, unless natural resources are being exploited. When a company buys a new fixed asset it doesn’t account for the full cost of it as one single large expense, instead the expense is spread over the life time of the asset. This is done by depreciating the asset. For example a company purchases a CNC router for €50,000 and will be used for five year. If they pay the full amount in the

Natalie estimates that all of her baking equipment will have a useful life of 5 years or 60 months and no salvage value. (Assume Natalie decides to record a full month’s worth of depreciation, regardless of when the equipment was obtained by the business.)

Identify the types and amounts of property, plant, and equipment, if any, as well as any related accumulated depreciation accounts.

Assets such as land, factory, and machinery used in production are some of the most significant investments for businesses. Businesses must capitalize these long term assets and can allocate the costs over the useful life of the assets as they are subject to obsolescence, wear and tear. Before 1981, both tax and financial accounting calculations for depreciation were similar; tax payers choose one of the various methods available. In 1981, tax and financial accounting depreciation methods parted ways when Congress introduced the Accelerated Cost Recovery System (ACRS) for computing depreciation expense. 1