Chapter 21 Accounting for Plant Assets and Depreciation Part II.

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Presentation transcript:

Chapter 21 Accounting for Plant Assets and Depreciation Part II

Disposing of a Plant Asset When a plant asset is no longer needed, it is disposed of. Section 2 of the plant asset record is completed. A journal entry is needed to achieve the following three effects: 1. Remove the original cost of the plant asset and its related accumulated depreciation 2. Recognizes any cash or other asset received for the old plant asset 3. Recognizes the gain or loss on the disposal, if any.

Gain on Plant Assets Revenue that results when a plant asset is sold for more than book value. Use the revenue account, Gain on Plant Assets

Loss on Plant Assets Loss that results when a plant asset is sold for less than book value. Use the expense account, Loss on Plant Assets

Declining-Balance Method of Depreciation Multiplying the book value at the end of each fiscal period by a constant depreciation rate. Used when plant assets depreciate more in the early year of useful life than in later years.

Real Property Land and anything attached to the land.

Personal Property All property not classified as real property.

Assessed Value The value of an asset determined by tax authorities for the purpose of calculating taxes.