Reaction Paper on Accounting

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.

The value of fixed assets typically decreases over time. The amount of the decrease each year is accounted for and is called depreciation. Depreciation for the year is expensed on the income statement and added to the accumulated depreciation account on the balance sheet. So the value of the fixed assets on the balance sheet is reduced by the accumulated depreciation.

In response to you requested investigation regarding the property, equipment and intangible asset accounts, we have completed adjustments to the necessary accounts. During the year new office equipment was purchased at a cost of $2,697.50. We will calculate the difference between the accumulated Depreciation of office equipment balance and the office equipment account. We will then include the new office equipment to the balance, and then multiply the new balance by 20 percent using the declining-balance basis:

 The characteristics that excludes long-term assets subject to depreciation accounting, or goods which, when put into use. Even if a depreciable asset is retired from regular use and held for sale it does not mean that the item should be classified as inventory.

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).

Property and Equipment—Depreciation and amortization are provided on a straight-line basis over the estimated useful fives of the assets. The following table shows estimated useful lives of property and equipment.

Refer to ASC 410-20-30-1 (Asset Retirement Obligations - Determination of a Reasonable Estimate of Fair Value)

Depreciation and depletion are two models of computing financial reports. These techniques are used as adjustments when preparing statements of cash flow within the direct or indirect method. This paper will identify and examine the methods of depreciation and depletion, describe the difference between the methods, and compare and contrast depreciation and depletion as well using scholarly references to support the points.

If proper and adequate depreciation has not been provided on the fixed assets the result would be more profits in the Profit & Loss Account. This book profit might have been distributed as dividend and leaving no funds with which to replace the assets at the right time.

Furthermore, by adopting a historical cost approach the assets will be depreciated over that useful life which has been estimated. With the useful life of an asset being so subjective it is hard to apportion a useful figure to depreciation. By increasing the useful life of an asset you are effectively spreading the depreciation expense over a longer period of time resulting in lower depreciation expenses and vice versa. In fact, Zheng et al. (2012) go one step further and consider depreciation to be a strategy for managers to manipulate profits.

The current assets are those which are readily convertible into cash and cash equivalents due to their highly liquid nature and also form part of working capital of the company’s operations. However, the long term assets in contrast are not liquid because since they have a useful life of more than a year and hence their full value cannot be easily realized within

As part of the business and finance module, I am require to write a report, discussing how depreciation impacts a firm in the construction industry. Within this report I will discuss different areas of depreciation such as what is depreciation? , causes of depreciation, its importance in the construction industry, how depreciation affects profits and how depreciation can be measured. I will also discuss the different methods for calculating depreciation and the effects on accounts if depreciation is not accounted for. In this report, I will be giving examples of fixed assets that are common to the construction industry and also give examples of how depreciation is calculated.

3. Depreciation: The moment a product is sold it is considered as used product and price of the product is less. There are some exceptions to this rule as land; gold etc. usually appreciates over time. For other products customers are actually buying products that will depreciate over time.

One of these is with regards to goodwill and intangible assets with identifiable useful lives.