Accounting 1: Program #33 – “Intro to Fixed Assets”

Hey individuals exactly how you doing right here we are again we
have this lecture and also after that one more lecture and also then the examination deal with? Over chapters 8 9 as well as the first part
of ten. And also uh following period we will talk thoroughly
as much as what'' s mosting likely to get on the test the uh title these days'' s lecture is introduction to dealt with properties we really began at the extremely tail end of last lecture we began to discuss repaired possessions didn'' t we? We will proceed that day so allow ' s proceed as well as take an appearance at the homework I didn'' t have much this time did I Is think simply gave you 2 quick research studies I desire to do quick research 9 factor one which got on charge card right? And this topic or this chapter is covered in the balance dues phase even though credit cards actually aren'' t pure receivables are they okay um so let'' s proceed and also take an appearance at fast research nine point one prepare journal entrances for the complying with credit history card sales deals as well as the business uses the perpetual inventory system okay.Okay in scenario one we marketed ten thousand in merchandise that set you back seventy five hundred on MasterCard bank card the web cash invoices are immediately deposited in the storages financial institution account MasterCard bills a five percent cost right? Okay now if we would have oh where did I placed my pen? , if we would have uh oh the teacher can
' t find his pen, I got it dilemma avoided alright if we would certainly have
just cost money if we would have just sold for cash money what would our journal access have actually been I recognize that ' s not what they asked yet but if we would certainly have simply sold for money'our very first journal access to record the sale would certainly be cash sales for just how much? Ten thousand but we didn ' t sell on money did we we offered on credit report cards so um our initial journal access is this right below fine our initially journal access is we wear ' t get money of 10 thousand bucks we just obtain money
of ninety five hundred bucks which is one hundred percent minus the 5 percent charge times the sales right? The 5 percent we don ' t obtain gets debited If we would have marketed, to credit history card cost so we receive less cash here put on ' t we than it, uh
not offered it on credit score card remedy? They would certainly have just given us the cash By enabling our consumers to make use of credit rating cards it does cost us something? Gain we spoke about the advantages of credit rating cards last time you don ' t have to examine the credit value of your clients you get your cash money quicker it opens up a whole new client base that perhaps wouldn ' t buy If you didn ' t offer the credit rating card option.Now we do have to however we account for this, from you or nevertheless they spend for it bear in mind that you do also have'to do your journal entrance to uh debit cost of

products offered and decrease your product inventory
remember chapter 5 how there was 2 entries for a sale so the situation primary requires two
journal access as well as those are the journal access okay alright any type of inquiries on that particular one
? I know we have a second one below but any kind of concerns on the first scenario in fast research study 9 point one? Okay let ' s do fast research nine one number 2 we sold three thousand dollars of merchandise that cost fifteen hundred dollars on an
array of bank card currently here we don ' t get the money right now net money receipts are obtained seven
days later as this on right below and we are not debiting cash we are debiting ninety six percent of 3 thousand and also we are debiting accounts receivable not'from the consumer not from the consumer yet from the credit report card all right accounts receivable from the credit score card business currently we need to tape-record our cost of items marketed as well as well as then we need to wait 7 days and afterwards the charge card company pays us right? As well as that ' s the journal access 7 days later when we get our cash money from the credit report card firm we debit cash money as well as our receivable from the credit history card business is decreased.Okay. alright any questions on that particular does that make any type of sense folks? Any kind of complication there? Charge card generally are not as well tough of a. scenario however I'always ask concerning that on the examination you should
be familiar with that said alright. if there is no questions there after that let ' s leap over to the only various other research I asked.

fasted study 10 factor one alright quick research 10 point one alright quick research. 10 factor one on page 4 twenty one strike bowling sets up automated score maintaining tools. with an invoice expense one one hundred as well as eighty thousand bucks the electric employee called for. for the'setup sets you back eight thousand bucks extra
costs are three thousand. dollars for delivery and also twelve thousand six hundred for sales tax obligation during the setup. a part is carelessly left on the lane as well as hit by the automatic lane cleansing device.
the prices of repairing the element is twenty two fifty what ' s the total taped costs.
I imply we would have to record the twenty two fifty yet it would simply go into repair service. Extremely wise, really smart all right so that is the. Alright that ' s it for research isn ' t it.
Probably simply going to allow you go early today. no I ' m joking you recognize that ' s not real alright releases in advance as well as discuss a subject that.
is a really vital subject and also um we will do some deal with it here in course I ' ll provide. you some homework to do as well as um we will go from there what I desire to speak about today. is devaluation o0kay currently we have actually chatted a little regarding depreciation in chapter 3.
when'we reviewed adjusting journal access is that proper? Bear in mind depreciation? What is depreciation I intend to speak about. what devaluation is and I intend to speak about what depreciation is not fine'what devaluation. is, is the procedure of alloting the expense of plant assets to cost in the accounting. duration benefits in its usage all right alright coming off the PowerPoint a bit fine allow ' s. state that uh allow ' s claim that Jessica that you purchased a thirty thousand dollar truck for. you landscaping company fine now it would certainly not make good sense to expenditure that whole thirty. thousand dollars of vehicle in one year would it? Because that vehicle is going to profit, okay. you for a variety of years.Are you with me? That doesn '
t truly comply with the matching principal. You bear in mind the matching principal? We want to try to match the expenditures to. the periods in which they aided create the revenue so if we purchase a truck as well as simply debit. a vehicle cost for thirty thousand that doesn ' t really make any sense now allow ' s state you believe. that vehicle is mosting likely to last 6 years in your company
and also allow ' s claim that you assume it ' s. not mosting likely to deserve anything you could make a decision five thousand dollars each year for the next. six years do you see what I ' m stating as well as
by doing this every year you would have 5 thousand. bucks of devaluation cost expanded over the estimated period that you assume. that vehicle'will be beneficial in helping you produce profits for your organization do you understand? As well as we might make devaluation journal entrances'. month-to-month or we might do it'annually.Remember just how we discussed AJE ' some people. do it monthly some people do it every year so we simply need to you
know but because kind. of situation it would make even more feeling to spread out that expense as a cost over 6 years. ? And afterwards it wouldn ' t mess with our earnings. declaration either.
Think of if you expense that entire thirty. thousand in one year you would certainly go whoa why didn ' t we make any cash well we had the vehicle.
Okay it would actually mess with your economic. Okay so devaluation going back to the slide.
In a manner we are mosting likely to take it gradually off.
the annual report as well as slowly cost it fine now allow me tell you what devaluation is not. devaluation is not an attempt to document a property to its market price and this is really. very hard for- people to understand and also we need to truly really you understand truly truly. If I decrease that thirty, uh understand what we are speaking concerning right here coming off of that. thousand buck truck by five thousand bucks after one year I am not stating I assume the. Because we do not record, market worth is twenty five thousand bucks after one year fine. our assets on our annual report normally speaking attempting to identify the market value. due to the fact that what you believe the market value of that truck wants one year versus what I. assume versus what Jake assumes versus what ally assumes that ' s possibly 4 various. quantities that ' s also subjective alright the ordinary person who hasn ' t had the privilege of taking. accounting one they think that annual report report that they just constantly seem to assume. that equilibrium sheets report possessions at the market worth what they deserve if we offered them.
on the open market.It ' s not the situation depreciation is not an attempt. to write a possession down to what we assume it is at market price it is simply spreading.
it out the expense is that, are you trekking with me? Okay alright all right currently we are mosting likely to speak.
about some different kinds and each one of those sorts of devaluation we ' re mosting likely to. need to know the expense of the asset the salvage worth which is also called the recurring worth.
and this is what we think we can offer the property for if anything at the end of its approximated.
life okay as well as the instance we simply did Jessica we were just stating absolutely no which is most likely.
one of the most common salvage worth we use. But the salvage worth and also the recurring worth.
aren ' t the very same point as what we assume we can offer it for t completion of its life and also.
We have the third point we need is valuable life now I desire to aim out something here.
Yeah this one and also this one currently we understand the. Price we can simply look off the invoice? Salvage value is a quote that we make.
Alright allows talk about the straight line.
thousand dollars money the tools had an approximated beneficial life of 5 years as well as an.
approximated residual worth of 5 thousand dollars well exactly how much would we depreciate.
we would take the expense of the property of fifty thousand minus the salvage worth of 5 thousand.
Bear in mind the depreciation journal access. This is our entrance? That ' s our entry now one thing I want to aim.
That ' s the publication worth of the possession the book. Expense minus accumulated devaluation what is. Okay going back to this so this is our amount.
of devaluation utilizing the straight line approach for the initial year we chatted concerning exactly how it. would view on the equilibrium sheet currently observe with straight line method we take an equivalent.
quantity of depreciation each year don ' t we correct? And uh guide worth what does publication value.
Expense minus built up devaluation the publication. Of zero then that publication worth at the end of its devaluation quantities will be
zero. The devaluation rate is simply one hundred.
Price minus accumulated depreciation currently allow ' s. talk genuine quick concerning a various method that you haven ' t discovered and this set is going. to be ideal discovered by looking at an instance but bear with me as we undergo this
. slide this is called the devices of production method the units of manufacturing the numerator.
that we begin with is still set you back minus salvage value yet after that we separate it by what we assume. the overall amo8unt of manufacturing we will obtain out of that possession is going to be and also this. is mosting likely to be our depreciation each then annually'we are going to take that depreciation. per system times the variety of devices generated because duration all right the variety of units generated. in that period.Are you with me? So allow ' s consider an example on December thirty. one of 2012 equipment'was acquired for fifty thousand dollars money. The equipment is expected to produce one hundred. thousand devices during its valuable life that ' s the complete amount of manufacturing we'are going. to obtain out of this thing quote of training course as well as it has actually an approximated salvage worth of 5. thousand bucks now in
2013 twenty two thousand systems were created what ' s the amount of depreciation. expense we take well initial lets identify a devaluation per devices we taker the price. of fifty thousand minus the approximated recurring value of 5 thousand split by the one. hundred thousand complete quantity of production we assume we are going to get which provides.
us forty 5 cents each are you with me? Currently annually what we are mosting likely to do is take.
that forty 5 cents each times the number of manufacturing for that period I assume this.
example claimed that in two 2013 we produced twenty 2 thousand devices didn ' t we? Twenty 2 thousand times that forty five. cents per system equals ninety nine hundred and that ' s the quantity of devaluation that.
Currently do you see under this approach the quantity. Is different? As an issue of reality if for some reason the.
tools I still 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 annually we take that twenty 2 thousand buck.
unit times that devaluation each up until its completely depreciated down to its salvage.
worth of 5 thousand are you with me? Now um'can you think about any example that it. might make good sense to make use of the
unit of production method? One method or one example where they might. use it is lets state that truck you purchase will last a total amount of we assume it will certainly last a total.
of one hundred and fifty thousand miles well might you see where we are mosting likely to number. out the devaluation per mile that we are going to take ach period times the number. of miles that we drove
do you see what I ' m stating that could be a great way to spread out.
Now I want to do a couple of examples below.
those right there fine quick research ten 3 and quick research study 10 four do these two and also.
we will certainly return in a couple of mins and also review them.Okay releases over these fast research ten 3. quick study ten four on fast research study ten three on January two two thousand as well as eleven the. crossover band acquires sound equipment for sound performances at an expense of fifty 5. thousand nine hundred dollars the band approximates it will use its equipment for four years throughout. which time it anticipates doing concerning one hundred as well as fifty performances it approximates. that'after four years it can sell the devices for nineteen hundred bucks throughout the year. two thousand eleven the band executed forty concerts compute the year two thousand eleven. depreciation making use of the straight line method fine well the uh what we would certainly find out
. Of all is how a lot we'are going to depreciate per year as well as we would take the price of fifty.
5 thousand 9 hundred minus the residual value of nineteen dollars split by 4 years.
Equals thirteen thousand 5 hundred devaluation for the year? As well as of training course they
didn ' t ask us to do the. Okay that ' s pretty very easy isn ' t it okay what.
leave that possession which implies we are mosting likely to decrease four hundred and also fifty.
dollars devaluation per performance appropriate >? Now the number of concerts did we do? In this duration we did forty in 2011 so we. take forty times four hundred as well as fifty and also that implies we are mosting likely to take eighteen thousand. bucks devaluation in 2011 are you with me? Once again they didn ' t ask us to do the journal. If they would have we would certainly debit depreciation cost and accredit gathered, entrance but. devaluation for eighteen thousand dollars that ' s not as well difficult is it
? okay um what it'' s called is the decreasing balance method as well as what you are going to discover.
with the decreasing balance is that we are mosting likely to take where is my guideline we are going
. to take even more depreciation or a higher amount of depreciation in the very early years and also much less.
In the later years and occasionally we do this because it off sets our repair expenditure? If you have actually ever had a car you know.
that there is generally less fixing cost in the very early years of your auto than.
in the late so in some cases this equilibrium things out on the um earnings declaration the decreasing.
equilibrium method we are going to discover simply the double decreasing equilibrium method and its.
mosting likely to you are visiting that we are mosting likely to take more depreciation in the early.
years than in the later years all right now exactly how does this job? Well you actually desire to go through it step.
by action okay you truly wish to walk through this step by action the initial thing that you.
are mosting likely to identify is to take this straight line you are mosting likely to calculate this straight.
When we did that at that one slide you simply take one hundred, line rate currently do you remember.
percent separated by the helpful life which offers you your straight line price so in this.
case its one hundred percent split by the property we have actually been speaking about has a five.
year beneficial life so our straight line rate is twenty percent then we take that twenty.
Because we are discovering the dual declining equilibrium, percent as well as we multiply it by two.
method all right which gives us our dual decreasing equilibrium price okay are you with me until now? What we are going to do is we are going.
to take that dual declining equilibrium price each period times the start period book.
worth now what does book worth equal? Cost much less collected devaluation currently the
. beginning duration publication worth as we begin is fifty thousand because that is the price of.
Fifty thousand minus built up depreciation no we place'' t depreciated anything yet? But just how we did this is then we obtain twenty.
thousand dollars devaluation for two thousand thirteen fine are you with me? Currently um what is it for the following year well for.
2014 for 2014 we are mosting likely to take the double declining equilibrium price times the beginning.
of the year book worth which in this instance is the cost of fifty thousand minus whatever.
we decreased i9n this instance we depreciated twenty thousand fifty minus twenty is thierty.
is forty percent equals twelve thousand are you with me? Currently pupils have a propensity to fight with.
this um and so I have actually made up I put on'' t know if it assists or otherwise'if it doesn ' t then don ' t. use it however I have actually composed this little worksheet to kind of stroll people via this currently for.
you individuals in the house I have this on angel under the chapter ten lessons currently let'' s go in advance. and take a look at that and allows do the example that got on the display utilizing this worksheet.
do your remember what the price was? It was fifty thousand dollars fine what was.
the approximated life fife years and you remember what the salvage value was? Wasn'' t it five thousand dollars? Someone dual check it.Okay so the approximated life we have that ' s. EL expense is C so the initial thing we do is take one hundred percent split by the estimated. life of 5 years and that gives us our
straight line rate of twenty 5 percent we take that. times 2 since it ' s the dual declining balance method and we obtain forty'percent that. is our double declining balance rate are you with me? Depreciation cost for year one we take. C the cost of fifty thousand times the double declining balance 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 simply did that'on the display didn ' t we? What regarding year two?
Well we take the expense of fifty thousand minus.
well just how much did we diminish in year one twenty thousand just how much did we diminish.
in year 2? Twelve thousand fine so guide value of. the asset 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 provides us I think seventy 2.
hundred dollars is that proper? Now do you see just how the quantity of depreciation. we are taking every year drops? Alright? , if that worksheet doesn ' t assistance you believe with.
it after that by all ways wear ' t use it now you can pull off if you fill this in you can draw.
one more one off angel as well as'use it again Dave Krug developed that so every time that utilized.
I get twenty 5 cents which behaves all right I got that opting for me okay so if you look.
at devaluation you will certainly see there is our twenty thousand which we computed there.
is our twelve thousand which we determined our seventy two hundred and if we would maintain.
going these would certainly be the amounts that we would certainly get currently remember though we might just drop. to well let me back up below we have actually depreciated listed below our approximated salvage value we can '
t. do that this finishing number has to be what our salvage value is so in some cases we have. to require that last number since we want a finishing publication value when we are done depreciating. equal to the approximated salvage worth that we established if it was zero it would certainly be absolutely no. In this situation it was five thousand but you are not simply going to keep decreasing. things till they have adverse publication values right? Occasionally we
have to force require depreciationDevaluation expenditure in the in 2015 okay currently a testimonial of these methods the
straight line method. offered us equal quantities of devaluation for every year the devices of manufacturing approach was.
Different amounts in each year depending on what our production was? As well as the double declining balance method it. was a less it decreased didn ' t it dropped a various quantity ever before year okay currently I can. assurance you on the test you are going to have a problem not a multiple option but a. issue where I am going to provide you a number of details regarding a set property and I ' m. mosting likely to want you to identify what ' s the devaluation for the very first year approximately if we. made use of straight line well suppose we utilized devices of production well what happens if we used dual. decreasing balance and it ' s the trouble on my examination that people tend to do. the worst on I desire you to do well all right I desire you to do good on it so uh let ' s do one.
Value of one hundred and fifty thousand dollars calculate the depreciation expenditure for the. Nine hundred thirty thousand the estimated. One hundred
and and also thousand okay fine the.
our double decreasing balance rate will certainly be twenty five percent so I can simply load that. in in all o9f these right? Okay depreciation in year one the book value. is simply the cost there is no devaluation yet so the expense is nine hundred and thirty. thousand bucks times twenty five percent that amounts to 2 thirty 2 5 hundred okay. two thirty 2 5 hundred did you obtain that? What concerning year two well you take the expense. of nine hundred and thirty thousand minus whatever we decreased minus what we diminished. two hundred and 2 thirty five alright as well as we take that times twenty 5 percent and also that. gives us let me do that in my head genuine fast um if I calculate it in my head I obtain one. hundred and seventy four three 7 five is that right? Okay what about devaluation for year three. I take 9 hundred and also thirty thousand price minus whatever it is we decreased year one. was two thirty 2 five hundred year 2 was one seventy 4 3 7 five and also you.
Take that book worth times twenty five percent and also I ' m going to go ahead and also round this. I believe you can obtain regarding one thirty seven 8 one is that correct? And the overall built up devaluation currently. is five thirty seven 6 fifty 6 as well as it doesn ' t we place ' t depreciated listed below the salvage. worth right here if we kept doing this we would specify where we would have to compel. the last one however we are still great to go and also I put on ' t recognize did that aid did anybody. usage that worksheet? Okay you can print those off on angel if you. would certainly such as alright currently what I want you to do for research exists are uh for research. I want you to do five workouts I desire'you to do work out 10 factor 4 with 10. point 8 so do ten factor four 10 factor 5 ten factor 6 ten point 7 ten point. eight workout that ' s what I desire you to do for your homework fine many thanks bye.

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