Hey people exactly how you doing here we are again we
have this lecture and after that another lecture and afterwards the test remedy? Over chapters 8 9 and also the first part
of ten. As well as uh following period we will certainly talk thoroughly
regarding what'' s going to get on the test the uh title of today'' s lecture is introductory to fixed possessions we really started at the very tail end of last lecture we started to discuss taken care of possessions didn'' t we? We will continue that day so allow ' s proceed and take a look at the research I didn'' t have a lot this time around did I Is think simply gave you two fast studies I wish to do fast research nine point one which was on charge card right? And this subject or this chapter is covered in the receivables phase even though bank card actually aren'' t pure receivables are they okay um so allow'' s go on and also take a look at fast research study nine factor one prepare journal entries for the adhering to credit history card sales deals and the business utilizes the perpetual inventory system okay.Okay in scenario one we sold ten thousand in goods that set you back seventy 5 hundred on MasterCard bank card the internet cash money receipts are right away deposited in the cellars financial institution account MasterCard bills a 5 percent Fee? Okay now if we would have oh where did I placed my pen? If we would certainly have uh oh the teacher can
' t find his pen, I got it crisis averted fine if we would have
just cost cash money if we would have actually simply sold for cash what would certainly our journal entry have been I recognize that ' s not what they asked yet but if we would certainly have just cost money'our first journal entry to videotape the sale would certainly be money sales for exactly how much? Ten thousand however we didn ' t sell on money did we we marketed on charge card so um our very first journal entry is this right here all right our Journal entry is we put on ' t get money of 10 thousand bucks we just obtain money
of ninety 5 hundred dollars which is one hundred percent minus the five percent charge times the sales right? The five percent we wear ' t obtain obtains debited If we would certainly have offered, to credit scores card expense so we get much less cash right here wear ' t we than it, uh
not marketed it on bank card correct? After that they would have just given us the cash so by allowing our consumers to use bank card it does cost us something right? But gain we spoke about the advantages of credit cards last time you put on ' t have to review the credit scores worthiness of your clients you obtain your cash money quicker it opens an entire new consumer base that maybe wouldn ' t buy If you didn ' t provide the credit score card option.Now we do have to nonetheless we account for this, from you or nonetheless they spend for it bear in mind that you do likewise have'to do your journal entrance to uh debit cost of
products marketed as well as decrease your product inventory
bear in mind chapter five just how there was two entrances for a sale so the situation leading needs two
journal entrances and those are the journal access fine alright any kind of concerns on that one
? I know we have a 2nd one here yet any kind of concerns on the initial scenario in fast research study 9 factor one? Okay let ' s do quick research study 9 one number two we offered 3 thousand dollars of merchandise that cost fifteen hundred bucks on an
assortment of charge card now right here we don ' t obtain the cash immediately web cash money invoices are received seven
days later as this on right here and also we are not debiting money we are debiting ninety six percent of 3 thousand and also we are debiting receivables not'from the customer not from the customer but from the charge card all right receivables from the credit report card firm currently we have to videotape our cost of items sold also and after that we have to wait seven days and after that the charge card business pays us right? Which ' s the journal entrance seven days later when we obtain our cash from the bank card company we debit cash and our receivable from the credit card business is decreased.Okay. alright any concerns on that particular does that make any kind of sense folks? Any type of complication there? Bank card generally are not also hard of a. scenario however I'constantly ask concerning that on the examination you should
recognize with that alright. if there is no questions there after that allow ' s jump over to the just other research I asked.
which
was quick research 10 factor one alright quick research ten factor one alright fast study. 10 point one on web page 4 twenty one strike bowling mounts automatic score maintaining tools. with a billing cost one one hundred as well as eighty thousand dollars the electrical worker called for. for the'installment sets you back eight thousand dollars extra
prices are three thousand. dollars for distribution and twelve thousand 6 hundred up for sale tax obligation during the setup. a component is thoughtlessly left on the lane and also hit by the automatic lane cleansing machine.
the prices of repairing the part is twenty 2 fifty what ' s the complete documented expenses.
I mean we would have to tape the twenty 2 fifty but it would simply go right into repair service. Extremely smart, extremely smart all right so that is the. Alright that ' s it for homework isn ' t it.
Possibly simply mosting likely to allow you go early today. no I ' m joking you recognize that ' s not real alright releases in advance and speak about a topic that.
is a very important subject and we will certainly do some work on it below in course I ' ll provide. you some research to do and also um we will go from there what I intend to discuss today. is devaluation o0kay now we have actually spoken a bit concerning depreciation in chapter three.
when'we reviewed readjusting journal access is that appropriate? Bear in mind depreciation? What is depreciation I intend to speak about. what depreciation is and also I wish to speak about what depreciation is not alright'what depreciation. is, is the process of allocating the price of plant assets to expenditure in the accounting. duration advantages in its usage all right alright coming off the PowerPoint a little fine let ' s. say that uh let ' s claim that Jessica that you acquired a thirty thousand dollar truck for. you landscaping service fine now it would certainly not make sense to cost that whole thirty. thousand bucks of truck in one year would it? Okay since that truck is mosting likely to profit. you for a variety of years.Are you with me? That doesn '
t actually comply with the matching principal. You remember the matching principal? We want to attempt to match the expenditures to. the durations in which they assisted develop the revenue so if we get a truck and also simply debit. a vehicle expenditure for thirty thousand that doesn ' t really make any kind of feeling currently allow ' s state you think. that truck is mosting likely to last six years in your organization
as well as let ' s state that you believe it ' s. not going to be worth anything you might choose five thousand bucks annually for the following. 6 years do you see what I ' m stating and
this way annually you would certainly have 5 thousand. bucks of devaluation expenditure spread out over the estimated period that you believe. that vehicle'will be useful in aiding you produce profits for your business do you understand? And also we may make depreciation journal entrances'. month-to-month or we may do it'annually.Remember just how we spoke about AJE ' some individuals. do it monthly some people do it every year so we simply have to you
recognize however in that sort. of situation it would certainly make even more sense to spread that expense as an expense over six years. ? And also after that it wouldn ' t mess with our earnings. statement either.
Think of if you expense that whole thirty. thousand in one year you would go whoa why didn ' t we make any money well we had the vehicle.
purchase. Okay it would really tinker your economic. base. Okay so depreciation returning to the slide. what we wish to do is expanded that expenditure over a variety of uh over the variety of accountancy. period that we think will certainly take advantage of it.In a way
we are mosting likely to take it gradually'off. the annual report as well as slowly expense it okay currently allow me inform you what devaluation is not.
due to the fact that what you assume the market worth of that vehicle desires one year versus what I. assume versus what Jake believes versus what ally assumes that ' s probably four different. amounts that ' s too subjective okay the layman who hasn ' t had the advantage of taking. accounting one they believe that balance sheets report that they simply constantly appear to believe. If we marketed them, that balance sheets report properties at the market worth what they are worth. on the open market.It ' s not the case
depreciation is not an effort. to compose a property down to what we believe it is at market price it is just spreading. it out the expense is that, are you hiking with me? Okay alright fine now we are going to speak. about some different kinds and also every one of those sorts of devaluation we ' re going to. need to recognize the expense of the asset the salvage worth which is
also called the recurring worth. and this is what we believe we can sell the possession for if anything at the end of its estimated. life fine as well as the instance we simply did Jessica we were just claiming absolutely no which is probably
. one of the most typical salvage value we use.
The salvage worth and also the recurring value. aren ' t the exact same thing as what we assume we can offer it for t completion of its life and also. after that we have the third point we need works life currently I intend to point out something here. that is very important all right there are two of these things that are estimates which are they? Yeah this set as well as this one now we recognize the. Cost we can just look off the billing? Salvage worth is an estimate that we make. as works life some individuals think monetary accounting
is simply black as well as white.It ' s constantly one hundred percent no numbers. it ' s not real there is great deals of estimates in accounting and also in devaluation we have to. quote what we think the salvage worth is and we need to approximate what we think beneficial. life is alright so these are some aspects that we are going to need to referred to as we are functioning. on our devaluation techniques currently we
are going to find out in this course 3 devaluation. approaches we are mosting likely to find out straight line which we currently know or must remember from.
phase three we are mosting likely to learn something called systems of production and then we are.
Alright allows talk about the straight line.
we would certainly take the cost of the asset of fifty thousand minus the salvage worth of 5 thousand.
as well as separate it by 5 years and also that means we will diminish nine thousand bucks per.
year all right exactly how does that journal entrance look? Keep in mind the devaluation journal access.
what does that spell do you bear in mind that? DEA D, dead bear in mind that from phase three.
This is our entry? That ' s our access currently one point I desire to direct. Does anybody remember what we call that forty.
Because, one thousand it ' s really essential and also I want you to remember what ' s that is called.
we are going to be using it a lot in chapter ten does any person remember what cost less collected'. depreciation is? That ' s the book value of the property the book. value of the asset fine'so what does publication worth equal? Expense minus collected devaluation what is. the book worth of an asset what is it all together cost less accumulated depreciation. Due to the fact that we are, price minus built up depreciation is the book worth of an asset fine. mosting likely to be servicing troubles where it claims take the book value of a property as well as you are. mosting likely to go what is that well that ' s cost minus depreciation to make sure that ' s just how that would certainly. look after one year remedy'? Okay going back to this so this is our amount.
of depreciation using the straight line approach for the initial year we talked concerning just how it. would view on the annual report now see with straight line method we take an equivalent.
quantity of devaluation yearly wear ' t we deal with? And also uh guide worth what does book value.
Cost minus built up devaluation the book. Of zero then that book worth at the end of its devaluation amounts will certainly be
zero. The depreciation rate is simply one hundred.
Cost minus accumulated depreciation now let ' s. talk genuine fast about a various method that you sanctuary ' t discovered and this is going. to be finest found out by checking out an instance um however bear with me as we undergo this
. slide this is called the units of manufacturing technique the systems of manufacturing the numerator.
that we begin with is still set you back minus salvage worth but then we separate it by what we assume. the total amo8unt of production we will certainly leave that possession is going to be as well as this. is mosting likely to be our depreciation per device then yearly'we are going to take that devaluation. each times the variety of systems created because duration alright the number of devices generated. because period.Are you with me? Let ' s look at an example on December thirty. one of 2012 tools'was acquired for fifty thousand dollars cash. The equipment is expected to create one hundred. thousand devices throughout its helpful life that ' s the complete quantity of manufacturing we'are going. to get out of this thing quote naturally as well as it has an estimated salvage value of five. thousand bucks currently in
2013 twenty 2 thousand systems were generated what ' s the quantity of depreciation. expense we take well first lets number out a devaluation per systems we taker the cost. of fifty thousand minus the estimated recurring worth of 5 thousand divided by the one. hundred thousand total quantity of manufacturing we think we are going to obtain as well as that provides.
us forty five cents each are you with me? Now each year what we are going to do is take.
that forty five cents per unit times the variety of production for that duration I believe this.
example claimed that in 2 2013 we created twenty two thousand devices didn ' t we? So twenty two thousand times that forty 5. cents per device equates to ninety 9 hundred as well as that ' s the quantity of depreciation that.
Currently do you see under this method the amount. Is different? As an issue of reality if for some factor the.
equipment I idle as well as it doesn ' t generate any kind of devices this is absolutely no after that the devaluation expenditure. we take on that is absolutely no for that year so yearly we take that twenty 2 thousand dollar.
unit times that depreciation per unit until its totally diminished down to its salvage.
Currently 'can you believe of any type of example that it. One technique or one instance where they might.
of one hundred and fifty thousand miles well can you see where we are mosting likely to number. out the devaluation per mile that we are going to take ach duration times the number. of miles that we drove
do you see what I ' m stating that may be a great way to spread out.
that expense out yet again we are not attempting to note it down to market worth yet that might. be a great means to allot that cost understand? Now I intend to do a pair of examples here. in course of these 2 so let ' s proceed while they roll that music releases in advance as well as do. fast study ten factor 3 as well as quick research study 10 point 4 um in your book you can see.
those appropriate there fine fast study 10 three and fast study 10 four do these 2 as well as.
Of all is exactly how a lot we'are going to drop per year as well as we would certainly take the price of fifty.
five thousand nine hundred minus the residual worth of nineteen bucks divide by four years.
Equates to thirteen thousand five hundred depreciation for the year? And also of program they
didn ' t ask us to do the. Okay that ' s quite easy isn ' t it all right what.
leave that property as well as that indicates we are mosting likely to depreciate four hundred as well as fifty.
Currently how many performances did we do? In this duration we did forty in 2011 so we. Once once again they didn ' t ask us to do the journal.Okay now I promise you I assure you I'' m going to ask you to do this on the examination fine so allow ' s go on to the third approach now the third technique I will certainly tell you is the technique that pupils have a little more difficulty with fine as well as I'' m mosting likely to promise you I ' m going to ask this on the test and I desire you to be able to do it some student have just also left this problem empty it'' s like I wear ' t. even want to try it and also I truly wish to function on this I actually want you to recognize this. alright what it'' s called is the declining balance method and what you are mosting likely to discover.
with the declining equilibrium is that we are mosting likely to take where is my reminder we are going
. to take more depreciation or a higher quantity of devaluation in the very early years and also much less.
in the later years and in some cases we do this due to the fact that it off sets our repair work cost right? , if you have ever had an auto you know.
.
that there is typically much less repair service expenditure in the very early years of your vehicle than.
in the late so sometimes this balance points out on the earnings statement the decreasing.
equilibrium approach we are mosting likely to learn just the double declining balance approach as well as its.
mosting likely to you are visiting that we are mosting likely to take even more devaluation in the very early.
years than in the later years okay currently exactly how does this job? Well you truly desire to walk with it step.
by action all right you really intend to stroll via this detailed the initial thing that you.
are going to find out is to take this straight line you are mosting likely to determine this straight.
When we did that at that one slide you simply take one hundred, line rate currently do you remember.
percent split by the useful life which offers you your straight line price so in this.
instance its one hundred percent separated by the property we have been speaking about has a 5.
year helpful life so our straight line rate is twenty percent after that we take that twenty.
percent and also we multiply it by two because we are finding out the dual declining balance.
method fine which offers us our double decreasing balance rate alright are you with me so far? What we are going to do is we are going.
to take that double declining balance price each duration times the start period publication.
value now what does publication worth equivalent? Price less accumulated depreciation now the
. beginning period book value as we begin is fifty thousand because that is the cost of.
fifty thousand minus collected devaluation absolutely no we haven'' t decreased anything yet appropriate? Exactly how we did this is after that we obtain twenty.
thousand dollars devaluation for two thousand thirteen all right are you with me? Currently um what is it for the next year well for.
2014 for 2014 we are mosting likely to take the dual declining equilibrium price times the start.
of the year publication value which in this situation is the price of fifty thousand minus whatever.
we decreased i9n this situation we decreased twenty thousand fifty minus twenty is thierty.
is forty percent equates to twelve thousand are you with me? Currently students tend to deal with.
this therefore I have actually composed I don'' t recognize if it aids or not'if it doesn ' t after that wear ' t. use it but I have made up this little worksheet to kind of walk people via this now for.
you people at residence I have this on angel under the chapter 10 lessons currently allow'' s go in advance. and have a look at that and also allows do the example that got on the display using this worksheet.
do your remember what the expense was? It was fifty thousand bucks okay what was.
the approximated life fife years as well as you remember what the salvage worth was? Wasn'' t it 5 thousand bucks? Someone check it.Okay so the approximated life we have that ' s. EL expense is C so the very first point we do is take one hundred percent separated by the estimated. life of five years and also that offers us our
straight line price of twenty 5 percent we take that. times 2 since it ' s the dual decreasing equilibrium approach and also we obtain forty'percent that. is our double decreasing equilibrium price are you with me? Depreciation expenditure for year one we take. C the expense of fifty thousand times the dual declining equilibrium rate of forty percent and also. that offers us twenty thousand dollars that ' s the quantity of devaluation for many years one as well as. we just did that'on the screen didn ' t we? What about year two?
Well we take the expense of fifty thousand minus. currently this is guide worth this in the parenthesis right below is guide worth the expense minus. what have we depreciated thus far we have actually decreased twenty thousand and also we take that times the. double declining price of forty percent and what does that equal that
equates to twelve thousand. fine what concerning depreciation for several years 3 well right below in between my finger is going. to be the book value asset which is the cost of fifty thousand minus whatever we have actually decreased.
well how much did we decrease in year one twenty thousand just how much did we diminish.
in year 2? Twelve thousand okay so the book worth of. the property is actually fifty thousand minus twenty minus twelve its eighteen thousand. isn ' t it? It ' s eighteen thousand and we are going to. take that times the dual decreasing balance price'which gives us I believe seventy 2.
Now do you see exactly how the amount of devaluation. If that worksheet doesn ' t help you believe through.
If you fill this in you can pull, it after that by all means wear ' t usage it now you can draw off.
another one off angel as well as'utilize it once again Dave Krug made that so each time that utilized.
I get twenty five cents which is great all right I obtained that going for me all right so if you look.
at devaluation you will certainly see there is our twenty thousand which we determined there.
is our twelve thousand which we computed our seventy 2 hundred as well as if we would keep.
In this instance it was 5 thousand yet you are not simply going to keep decreasing. Points until they have negative book worths? Often we
have to force require depreciation.
Different amounts in each year depending on what our production was? And the dual declining balance approach it. was a much less it dropped didn ' t it went down a different amount ever before year alright now I can. guarantee you on the examination you are going to have a trouble not a numerous selection however a. issue where I am going to give you a lot of information regarding a fixed asset and also I ' m. mosting likely to desire you to find out what ' s the devaluation for the initial year or so if we. If we used devices of manufacturing well what if we utilized dual, used straight line well what. declining equilibrium as well as it ' s the issue on my examination that people tend to do. the most awful on I desire you to do well all right I want you to do excellent on it so uh allow ' s do one.
If you are not done at home simply pause, of these in class allowed ' s do fast study ten point six quick study 10 factor 6 okay.Okay. as well as press play when you are real fast research study ten six a fleet of chilled shipment vehicle. is required on January 5 of 2 thousand eleven at an expense of
nine hundred and also thirty. thousand bucks with an approximated helpful life of eight years and an estimated salvage. value of one hundred as well as fifty thousand dollars compute the depreciation expense for the very first. 3 years utilizing the double decreasing equilibrium
method all right alright I intend to make certain we. get with this I might need to relocate a little quicker than I would certainly have suched as however what was. the expense of this vehicle? Or what was the cost of this devices? 9 hundred thirty thousand the estimated. life was what? Eight years and also the salvage worth was what? One hundred
and also fifty thousand okay so the. approximated life is eight years one hundred percent divided by eight amounts to twelve and. Because it ' s the dual declining equilibrium technique as well as, a half percent we take that times 2.
Okay depreciation in year one the publication value. Okay what concerning depreciation for year three. I take nine hundred as well as thirty thousand price minus whatever it is we dropped year one.
Take that book worth times twenty 5 percent and also I ' m going to go in advance and also round this. I believe you can get about one thirty 7 eight one is that proper? And the overall collected depreciation now. is five thirty seven 6 fifty 6 as well as it doesn ' t we place ' t decreased below the salvage. value right here if we maintained doing this we would specify where we would need to require. the last one yet we are still great to go as well as I put on ' t recognize did that assistance did anybody. use that worksheet? Okay you can publish those off on angel if you. would certainly like all right now what I want you to do for research is there are uh for research. I desire you to do five workouts I desire'you to do work out 10 factor four through 10. point 8 so do ten point 4 10 factor 5 ten point six ten point 7 10 factor. eight workout that ' s what I want you to do for your homework alright many thanks bye.