1. Accounting 211 Financial and Managerial Accounting Teaching Assistant Hyun Jung (JoAnn) Lee

2. Spring, 2008 1 Contents 1. Introduction 2. Review of Chapter 9 3. Practice

3. Introduction 1

4. Spring, 2008 3 Personal Blog : www.personal.psu.edu/hul152 Click on “ACCTG 211 Spring 2008” “Student Information Form”  Did you Bring IT!~^^* Office : 381A Business Building, 814-863-3796 Office Hour : 8 AM. ~ 10:00 AM on Tuesday Email : hul152@psu.edu Recitation Materials

5. Spring, 2008 4 Let's follow WileyPLUS’s directions!!~ List expenses in order of magnitude List assets in order of liquidity and liabilities in order of magnitude, with notes payable first. This is a minor point so Professor won't do this on the exam. This is a minor point so Professor won't do this on the exam. No number Enter “0” in the table All boxes must be filled. Negative number Use the negative (-) sign preceding the number. Use the negative (-) sign preceding the number. $ and Commas(,). Acceptable with and without dollar signs & commas WileyPlus Technical Issues

6. Spring, 2008 5 Ask “W.G. Deng” for “PERMISSION” Contact Information Office : 350A Business Building Phone : 863-5467 Email : wxd139@psu.edu Office Hours : Mon & Thrs from 1pm until 3pm and by appointment. Only one chance to take it Makeup for the First Exam : Mar 1st on Saturday 9 AM. Makeup for the Second Exam : April 5th on Saturday Make-up Exam Assignments

7. Review of Chapter 9 2

8. Spring, 2008 7 Operational assets are used by a business to generate revenue. Tangible operational assets have physical substance. Land, buildings, fixtures, and equipment Natural resources Usually before and then again after adjustments Long-term assets will be used more than one year. Reported on the balance sheet in a classification called Property, Plant, and Equipment. Classification of Operational Assets

9. Spring, 2008 8 Intangible operational assets lack physical substance and confer specific use rights on the owner.PatentsCopyrightsFranchisesLicensesTrademarks Classification of Operational Assets, conti.

10. Spring, 2008 9 Purchased operational assets are recorded at cost, an amount that includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. Acquisition cost is the net cash equivalent amount paid for the asset. Acquisition cost = Invoice price + below items Sales taxes Transportation costs Installation costs Renovation and repair cost incurred prior to use. Measuring and Recording Acquisition Cost

11. Spring, 2008 Costs of Land The cost of land includes: Acquisition price Real estate commissions Title search and transfer fees Title insurance premiums Delinquent taxes Surveying fees Land is not depreciated.

12. Spring, 2008 The matching principle requires that part of the acquisition cost be expensed in periods when the future revenues are earned. Nature of Depreciation, Depletion, and Amortization Capitalized Cost of asset on Balance Sheet As the asset is USED Expense Expense on Income Statement

13. Spring, 2008 12 The most general term for writing off an asset is amortization. However, specific terms are used for certain assets!!~Depreciation Property, plant, equipment Depletion Depletion Natural resources Terminology: Write-off….amortize

14. Spring, 2008 Depreciation Methods Straight-line Depreciation = (Cost - Residual Value)/(useful life) Units-of-Production Method Step 1 : Depreciation Rate (Cost - Residual Value)/(Estimated units of useful life) (Cost - Residual Value)/(Estimated units of useful life) Step 2 : Depreciation Expense Depreciation Rate(from Step1) * Number of Units Produced for the Year Depreciation Rate(from Step1) * Number of Units Produced for the Year

15. Spring, 2008 Depreciation Methods, conti. (Double) Declining balance Book Value = Acquisition costs – Accumulated Depreciation Depreciation Expense = Book Value × (2/useful life) Comparison of Methods The total amount of depreciation recorded over the useful life of an asset is the same regardless of the method used. Depreciation expense recorded in any one period will vary according to method used. The straight-line method is used by about 95 percent of companies because it is easy to use and to explain.

16. Spring, 2008 15 Accumulated Depreciation Total depreciation after purchasing Journal Entry Depreciation expense 100 / Accul. Depreciation 100 Reporting Form Example!! More readable!!!

17. Spring, 2008 Disposal of Operational Assets Compare cash received for the asset with the asset’s book value (BV). Book Value = Acquisition costs – Accumulated Depreciation If Cash > BV then “Record GAIN!!~~” If Cash < BV then “Record LOSS!!~~” If Cash = BV then “No GAIN or LOSS”

18. 3 Practice!!!

19. Spring, 2008 18 Problem 9-2 Problem 9-4 Problem 9-6 5 th Homework Due Date : “Next Monday 6 PM.” Problem : Chapter 9-1, 9-2, and 9-4 Chapter 9: Practice A

20. Spring, 2008 19 Do you have any questions? Welcome to Accounting World!!~ 381A Business Building 814-863-3796, hul152@psu.edu