1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-1 Buying Plant Assets and Paying Property Tax

2. CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 18-1 RECORDING THE BUYING OF A PLANT ASSET 12 3 page 535 January 3, 20X1. Paid cash for a display case, $3,250.00. Check No. 4. 3.Cash paid 4 2.Cost of the plant asset 1.Account title 4.Post

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 18-1 CALCULATING AND PAYING PROPERTY TAX page 536 February 1. Classic Parts, Inc., paid cash for property tax, $720.00. Check No. 69. Annual Property Tax =Tax Rate× Assessed Value $720.00=1.2%×$60,000.00

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 18-1 TERMS REVIEW real property personal property assessed value page 537

5. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-2 Calculating Depreciation Expense

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 18-2 Estimated Salvage Value Original Cost Estimated Total Depreciation Expense =– $3,000.00 Annual Depreciation Expense = Years of Estimated Useful Life ÷ Estimated Total Depreciation Expense $600.00 $250.00 $3,250.00 STRAIGHT-LINE DEPRECIATION Calculating Annual Depreciation Expense 1 page 538 =– = 5 ÷ $3,000.00 1.Subtract the asset’s estimated salvage value from the original cost. 2.Divide the estimated total depreciation expense by the years of estimated useful life. 2

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 18-2 Months in a Year Annual Depreciation Expense Monthly Depreciation Expense =÷ $50.00 Partial Year’s Depreciation Expense = Number of Months Asset Is Used × Monthly Depreciation Expense $250.00 12 $600.00 CALCULATING DEPRECIATION EXPENSE FOR PART OF A YEAR Calculating Partial Year’s Depreciation Expense 1 page 539 =÷ = 5 × $50.00 1.Divide the annual depreciation expense by 12. 2.Multiply the monthly depreciation expense by the number of months the plant asset is used in a year. 2

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 18-2 CALCULATING ACCUMULATED DEPRECIATION page 540 20X3 Depreciation Expense 20X2 Accumulated Depreciation 20X3 Accumulated Depreciation =+ $1,800.00$600.00 $1,200.00 =+

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 18-2 CALCULATING BOOK VALUE page 540 Accumulated Depreciation Original Cost Ending Book Value =– $1,450.00$1,800.00 $3,250.00 =– Annual Depreciation Beginning Book Value Ending Book Value =– $1,450.00$600.00 $2,050.00 =–

10. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-3 Journalizing Depreciation Expense

11. CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 18-3 3.Each year the asset is owned, record the year’s annual depreciation expense in Section 3. Calculate and record accumulated depreciation and ending book value. PREPARING PLANT ASSET RECORDS 1 2 3 page 542 2.Do not write in Section 2 until the asset is disposed of. 1.Write the information in Section 1 when the asset is purchased.

12. CENTURY 21 ACCOUNTING © Thomson/South-Western 12 LESSON 18-3 JOURNALIZING ANNUAL DEPRECIATION EXPENSE page 543 3.Record adjusting entry 2. Accumulated Depreciation credit 1. Depreciation Expense debit 1 3 3 2

13. CENTURY 21 ACCOUNTING © Thomson/South-Western 13 LESSON 18-3 POSTING AN ADJUSTING ENTRY FOR DEPRECIATION EXPENSE 1.Debit Depreciation Expense. page 544 2.Credit Accumulated Depreciation. 1 2

14. CENTURY 21 ACCOUNTING © Thomson/South-Western 14 LESSON 18-3 TERM REVIEW plant asset record page 545

15. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-4 Disposing of Plant Assets

16. CENTURY 21 ACCOUNTING © Thomson/South-Western 16 LESSON 18-4 SALE OF A PLANT ASSET FOR BOOK VALUE 1.Record an entry in the cash receipts journal to remove the original cost. page 546 January 6, 20X6. Received cash from sale of display case, $250.00: original cost, $3,250.00; total accumulated depreciation through December 31, 20X5, $3,000.00. Receipt No. 4. 2.Check the type of disposal, and write the date, and disposal amount in Section 2 of the plant asset record. 1 2

17. CENTURY 21 ACCOUNTING © Thomson/South-Western 17 LESSON 18-4 RECORDING A PLANT ASSET’S DEPRECIATION EXPENSE FOR A PARTIAL YEAR page 547 April 4, 20X7. Recorded a partial year’s depreciation on a safe to be sold, $60.00. Memorandum No. 31. 1.Debit the depreciation expense account. 2.Credit the accumulated depreciation account. 3.Update Section 3 of the plant asset record. 1 2 3

18. CENTURY 21 ACCOUNTING © Thomson/South-Western 18 LESSON 18-4 SALE OF A PLANT ASSET FOR MORE THAN BOOK VALUE 1.Remove the original cost. Record the gain on the sale. Record the cash received from the sale. page 548 April 4, 20X7. Received cash from sale of safe, $425.00: original cost, $1,800.00; accumulated depreciation through April 4, 20X7, $1,500.00. Receipt No. 47. 2.Check the type of disposal. Write the date and disposal amount in Section 2 of the plant asset record. 1 2

19. CENTURY 21 ACCOUNTING © Thomson/South-Western 19 LESSON 18-4 1.Remove the original cost. Record the loss on the sale. Record the cash received from the sale. SALE OF A PLANT ASSET FOR LESS THAN BOOK VALUE 1 page 549 October 6, 20X7. Received cash from sale of a computer, $150.00: original cost, $1,900.00; total accumulated depreciation through October 1, 20X7, $1,500.00. Receipt No. 281. 2.Check the type of disposal and write the date and disposal amount in Section 2. 2

20. CENTURY 21 ACCOUNTING © Thomson/South-Western 20 LESSON 18-4 TERMS REVIEW gain on plant assets loss on plant assets page 550

21. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 18-5 Declining-Balance Method of Depreciation

22. CENTURY 21 ACCOUNTING © Thomson/South-Western 22 LESSON 18-5 CALCULATING DEPRECIATION USING THE DOUBLE DECLINING-BALANCE METHOD 1 23 page 551 4 1.Calculate the double declining-balance rate. 2.Determine the annual depreciation expense. 3.Determine the ending book value. 4.Transfer the ending book value to the beginning book value for the following year.

23. CENTURY 21 ACCOUNTING © Thomson/South-Western 23 LESSON 18-5 CALCULATING THE LAST YEAR’S DEPRECIATION EXPENSE 23 page 552 1.Transfer the ending book value from Year 4 to the beginning book value of Year 5. 2.Subtract the salvage value from the beginning book value to determine the depreciation expense for the last year. 3.Verify that the ending book value is equal to the salvage value. 1

24. CENTURY 21 ACCOUNTING © Thomson/South-Western 24 LESSON 18-5 COMPARISON OF TWO METHODS OF DEPRECIATION page 553

25. CENTURY 21 ACCOUNTING © Thomson/South-Western 25 LESSON 18-5 TERM REVIEW declining-balance method of depreciation page 554