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

Hey individuals just how you doing right here we are once more we
have this lecture and then one even more lecture and after that the test correct? Over phases eight nine and the very first component
of 10. And also uh next duration we will speak carefully
regarding what'' s going to get on the examination the uh title these days'' s lecture is introductory to dealt with possessions we in fact began at the really tail end of last lecture we started to speak about fixed possessions didn'' t we? We will certainly proceed that day so let ' s go on as well as take a look at the research I didn'' t have much this time around did I Is assume just gave you Two quick researches I desire to do quick research nine point one which was on credit score card? As well as this topic or this phase is covered in the balance dues phase despite the fact that credit scores cards really aren'' t pure receivables are they okay um so allow'' s proceed and also take a look at quick study 9 factor one prepare journal access for the complying with charge card sales transactions and the business uses the continuous inventory system okay.Okay in situation one we offered ten thousand in goods that set you back seventy five hundred on MasterCard charge card the net cash money invoices are instantly deposited in the cellars checking account MasterCard charges a five percent fee right? Okay currently if we would certainly have oh where did I placed my pen? If we would have uh oh the educator can
' t discover his pen, I obtained it dilemma avoided all right um if we would certainly have
simply cost money if we would have just marketed for cash money what would certainly our journal entrance have been I understand that ' s not what they asked yet however if we would certainly have just cost cash'our very first journal entrance to record the sale would certainly be cash money sales for just how much? Ten thousand yet we didn ' t sell on cash did we we sold on credit report cards so um our very first journal entrance is this right here alright our Journal access is we put on ' t get cash of ten thousand bucks we only get money
of ninety 5 hundred bucks which is one hundred percent minus the 5 percent fee times the Sales? The 5 percent we put on ' t obtain gets debited to charge card expenditure so we obtain less money right here wear ' t we than if we would have offered it, uh
not marketed it on charge card deal with? After that they would have simply offered us the cash money By allowing our consumers to make use of credit rating cards it does cost us something? Yet gain we spoke about the benefits of credit report cards last time you don ' t have to evaluate the credit value of your customers you get your cash quicker it opens up an entire brand-new client base that possibly wouldn ' t buy If you didn ' t offer the credit rating card option.Now we do have to nonetheless we account for this, from you or however they pay for it bear in mind that you do likewise have'to do your journal entrance to uh debit expense of

products sold and decrease your product inventory
bear in mind phase 5 just how there was 2 access for a sale so the circumstance number one calls for two
journal entrances as well as those are the journal access fine alright any type of questions on that particular one
? I know we have a second one here but any concerns on the initial scenario in quick study 9 factor one? Okay allow ' s do quick research nine one number 2 we sold three thousand bucks of product that cost fifteen hundred bucks on an
assortment of credit history cards currently below we wear ' t get the cash money immediately web cash money invoices are received seven
days later on as this on right below and also we are not debiting cash money we are debiting ninety 6 percent of 3 thousand as well as we are debiting receivables not'from the consumer not from the customer yet from the charge card okay accounts receivable from the credit card firm currently we have to videotape our expense of goods marketed as well and also then we need to wait seven days and afterwards the charge card business pays us right? Which ' s the journal entry 7 days later on when we obtain our cash money from the charge card business we debit cash money and also our receivable from the charge card business is decreased.Okay. alright any kind of inquiries on that does that make any kind of sense individuals? Any type of complication there? Charge card typically are not too difficult of a. situation but I'always inquire about that on the examination you need to
be acquainted with that alright. if there is no concerns there then let ' s jump over to the only various other research I asked.

was fast research 10 factor one alright fast research study 10 point one alright quick research. 10 factor one on page 4 twenty one strike bowling sets up automatic rating maintaining tools. with a billing price one one hundred as well as eighty thousand bucks the electrical worker needed. for the'setup costs eight thousand dollars additional
costs are 3 thousand. bucks for distribution and also twelve thousand 6 hundred up for sale tax obligation throughout the installation. a part is carelessly left on the lane and also struck by the automatic lane cleaning maker.
the prices of fixing the element is twenty 2 fifty what ' s the total documented expenses.
I mean we would have to tape-record the twenty 2 fifty yet it would just go into repair work. Very clever, really clever okay so that is the. Alright that ' s it for research isn ' t it.
Possibly simply mosting likely to let you go early today. no I ' m joking you know that ' s not true alright releases ahead and also discuss a subject that.
is a really important subject and also we will certainly do some work with it below in course I ' ll give. you some research to do and also um we will go from there what I intend to discuss today. is devaluation o0kay currently we have chatted a bit about depreciation in chapter 3.
when'we discussed adjusting journal access is that correct? Keep in mind devaluation? What is depreciation I intend to speak concerning. what depreciation is and I wish to speak about what devaluation is not okay'what depreciation. is, is the procedure of assigning the cost of plant possessions to expense in the accountancy. period benefits in its usage all right alright coming off the PowerPoint a bit all right allow ' s. say that uh let ' s say that Jessica that you purchased a thirty thousand dollar truck for. you landscaping company okay now it would not make good sense to cost that entire thirty. thousand dollars of truck in one year would certainly it? Since that vehicle is going to profit, okay. you for a number of years.Are you with me? That doesn '
t actually comply with the matching principal. You keep in mind the matching principal? We wish to try to match the expenses to. the periods in which they aided produce the earnings so if we get a truck and also just debit. a truck expense for thirty thousand that doesn ' t truly make any type of feeling now let ' s state you believe. that truck is going to last 6 years in your service
and also allow ' s say that you assume it ' s. not going to be worth anything you may decide 5 thousand dollars per year for the following. 6 years do you see what I ' m claiming and
by doing this every year you would have 5 thousand. dollars of depreciation expense expanded over the approximated time periods that you believe. that vehicle'will be valuable in helping you develop earnings for your organization do you comprehend? As well as we may make devaluation journal entrances'. monthly or we might do it'annually.Remember just how we talked about AJE ' some people. do it monthly some people do it every year so we just have to you
understand yet in that kind. of scenario it would make even more feeling to spread that expenditure as a cost over six years. right? And after that it wouldn ' t mess with our revenue. statement either.
If you expense that entire thirty, assume concerning. thousand in one year you would go whoa why didn ' t we make any kind of cash well we had the vehicle.
purchase. Okay it would truly tinker your monetary. bottom. Okay so depreciation returning to the slide. what we desire to do is expanded that expenditure over a number of uh over the variety of accounting. period that we believe will gain from it.
In such a way we are mosting likely to take it gradually off.
the balance sheet and also slowly expense it alright now allow me tell you what depreciation is not. devaluation is not an effort to jot down a possession to its market value as well as this is really. extremely hard for- people to comprehend as well as we must really actually you understand really actually. uh understand what we are discussing here coming off of that if I depreciate that thirty. thousand dollar vehicle by 5 thousand bucks after one year I am not claiming I assume the. Because we do not videotape, market value is twenty 5 thousand bucks after one year fine. our properties on our annual report typically talking attempting to figure out the marketplace value. because what you believe the market worth of that truck seeks one year versus what I. believe versus what Jake assumes versus what ally assumes that ' s probably four various. amounts that ' s also subjective okay the layman who hasn ' t had the benefit of taking. accounting one they believe that equilibrium sheets report that they just constantly seem to assume. that annual report report assets at the marketplace value what they are worth if we sold them.
on the open market.It ' s not the case devaluation is not an effort. to write an asset down to what we assume it goes to market worth it is just spreading out.
it out the expenditure is that, are you travelling with me? Okay alright okay currently we are going to chat.
about some different kinds and every one of those types of depreciation we ' re mosting likely to. need to understand the cost of the property the salvage worth which is also called the recurring value.
and also this is what we think we can sell the asset for if anything at the end of its estimated.
life fine and also the instance we just did Jessica we were simply claiming zero which is probably.
the most common salvage value we use.But the salvage worth as well as the recurring worth.
aren ' t the very same point as what we believe we can sell it for t completion of its life and.
then we have the 3rd thing we need works life currently I desire to mention something here.
that is necessary alright there are 2 of these things that are estimates which are they? Yeah this one and also this one now we recognize the. expense we can just look off the billing right? However salvage worth is an estimate that we make. as serves life some people believe financial audit is just black as well as white. It ' s constantly

one hundred percent no numbers. it ' s not real there is'great deals of price quotes in bookkeeping and in depreciation we need to.
price quote what we think the salvage value is as well as we have to estimate what we believe useful. life is fine so these are some elements that we are going to require to called we are working.
on our devaluation approaches currently we are going to find out in this class three depreciation.
Alright allows talk regarding the straight line.
estimated recurring value of five thousand dollars well exactly how much would certainly we diminish.
we would certainly take the cost of the asset of fifty thousand minus the salvage value of 5 thousand.
and separate it by five years which implies we will depreciate 9 thousand dollars per.
Bear in mind the depreciation journal access. This is our access? That ' s our access currently one thing I want to direct.
year well one the annual report we would certainly have the cost of the assets of fifty thousand dollars. all right less less the collected depreciation of 9 thousand and also that would equate to forty.
one thousand what would we call that forty one thousand do you remember? Does any person remember what we call that forty. Because, one thousand it ' s extremely vital and also I want you to remember what ' s that is called.
we are going to be utilizing it a lot in phase ten does anyone remember what set you back less collected. devaluation is? That ' s guide value of the possession guide. value of the asset alright so what does publication worth equal? Price minus accumulated depreciation what is. the publication value of a possession what is everything together expense much less accumulated depreciation.
Due to the fact that we are, cost minus collected devaluation is the book worth of a property all right.
Okay going back to this so this is our quantity. And also uh the book worth what does publication value. Expense minus built up devaluation the publication.
and after that we are done aren ' t we? If we use the salvage worth, okay and of training course. Of zero then that publication value at the end of its depreciation amounts will certainly be zero. in this case we utilized a residual
value of five thousand cool? Currently in some cases they ask for what is the devaluation. rate under straight line well the devaluation rate under straight line is just one hundred. percent split by the approximated valuable life fine whoops. The depreciation price is merely
one hundred. percent separated by the valuable life of five years we essentially are decreasing twenty.
percent per year aren ' t we? Make good sense? Okay cool down any kind of questions on that particular? Another thing they wish to direct out

is once again. they take the equal quantity of devaluation yearly and the book worth declines at a. constant rate doesn ' t it for straight
line what ' s guide value? Price minus collected depreciation currently allow ' s. talk real
quick about a various technique that you place ' t found out and also this set is going.
to be finest discovered by checking out an example um however bear with me as we go through this. slide this is called the systems of manufacturing method the devices of manufacturing the numerator. that we start with is still set you back minus salvage value yet after that we split it by what we assume. the overall amo8unt of manufacturing we will
leave that possession is going to be as well as this. is mosting likely to be our depreciation per system then yearly we are mosting likely to take that depreciation. each times the variety of systems produced in that period okay the variety of devices created. The devices is expected to generate one hundred. Currently each year what we are
going to do is take. Twenty 2 thousand times that forty 5.
we are going to absorb 2013 they don ' t provide us an entry but it would certainly be ninety nine hundred. dollar debit to depreciation expense ninety 9 hundred buck debt to collected. depreciation comprehend? Currently do you see under this method the quantity. of production is going to change each year so the quantity of devaluation is mosting likely to. adjustment for each and every year below is that ninety nine hundred for the first year however took the quantity. Because the devices generated, of depreciation expenditure for each year is going to be different. Is different? Actually if for one reason or another the.
equipment I still and it doesn ' t produce any type of devices this is zero after that the devaluation expenditure. we handle that is no for that year so each year we take that twenty two thousand buck.
unit times that devaluation per unit up until its totally diminished to its salvage.
worth of 5 thousand are you with me? Now um'can you think about any type of instance that it. might make sense to make use of the
unit of manufacturing technique? One method or one instance where they might. utilize it is lets claim that truck you purchase will last an overall of we believe it will certainly last an overall.
of one hundred and also fifty thousand miles well could you see where we are going to number. out the depreciation per mile that we are going to take ach period times the number. of miles that we drove
do you see what I ' m claiming that may be an excellent way to spread.
that expense out yet again we are not trying to note it down to market value but that might. be a good means to assign that cost comprehend? Now I wish to do a pair of instances here. in course of these 2 so allow ' s proceed while they roll that music lets go in advance and also do. fast research study 10 factor three as well as fast study ten point 4 um in your publication you can see.
those right there all right fast study ten three and also fast study 10 four do these two and also.
we will come back in a few mins and discuss them.Okay releases over these quick research study ten three. fast study ten 4 on fast research study 10 3 on January two two thousand and eleven the. crossover band acquires sound equipment for audio performances at a price of fifty five. thousand nine hundred bucks the band approximates it will use its tools for four years throughout. which time it expects executing regarding one hundred and fifty performances it approximates. that'after 4 years it can sell the equipment for nineteen hundred dollars during the year. 2 thousand eleven the band carried out forty concerts calculate the year 2 thousand eleven. devaluation using the straight line approach fine well the uh what we would identify
. Of all is just how much we'are going to drop per year and also we would take the cost of fifty.
5 thousand 9 hundred minus the recurring worth of nineteen dollars divide by 4 years.
Equates to thirteen thousand 5 hundred devaluation for the year? Correct? As well as of program they
didn ' t ask us to do the. entrance but if they would certainly that would certainly be depreciation expense debited a gathered devaluation. Credited in this instance for thirteen five hundred? Make sense? Okay that ' s quite simple isn ' t it alright what. regarding 10 four quick study 10 4 well right here what we do first off is we take the the. cost minus the recurring value of nineteen hundred yet below we split it by one hundred
. and twenty performances which we assume is the overall amount of production we are going to.
leave that property which means we are going to decrease 4 hundred and fifty.
bucks devaluation per show correct >? Now how many performances did we do? In this duration we did forty in 2011 so we. take forty times four hundred and fifty as well as that suggests we are going to take eighteen thousand. bucks devaluation in 2011 are you with me? Once more they didn ' t ask us to do the journal. If they would certainly have we would debit devaluation expenditure as well as accredit collected, entry but. depreciation for eighteen thousand dollars that ' s not too difficult is it
?Okay now I guarantee you I promise you I'' m going to ask you to do this on the examination all right so let ' s carry on to the 3rd method currently the 3rd method I will certainly inform you is the method that students have a little more problem with okay and I'' m going to guarantee you I ' m going to ask this on the test and I desire you to be able to do it some pupil have simply also left this problem blank it'' s like I don ' t. also wish to attempt it and I really wish to deal with this I actually want you to comprehend this. alright um what it'' s called is the declining equilibrium technique and what you are mosting likely to locate.
with the decreasing equilibrium is that we are going to take where is my pointer we are going
. to take even more depreciation or a greater quantity of depreciation in the very early years and much less.
In the later years and often we do this since it off establishes our repair service cost? If you have actually ever before had an automobile you recognize.
that there is generally much less repair work cost in the early years of your vehicle than.
in the late so occasionally this balance things out on the um income statement the decreasing.
equilibrium method we are going to find out simply the double decreasing equilibrium technique as well as its.
mosting likely to you are visiting that we are mosting likely to take even more depreciation in the very early.
years than in the later years alright now exactly how does this job? Well you actually wish to walk through it step.
by step okay you really intend to walk via this action by step the first point that you.
are mosting likely to determine is to take this straight line you are going to calculate this straight.
line rate now do you keep in mind when we did that at that one slide you simply take one hundred.
percent split by the useful life as well as that offers you your straight line price so in this.
case its one hundred percent separated by the possession we have actually been discussing has a 5.
year helpful life so our straight line price is twenty percent then we take that twenty.
percent as well as we multiply it by two since we are learning the double declining equilibrium.
method fine which gives us our dual declining equilibrium price fine are you with me thus far? After that what we are mosting likely to do is we are going.
to take that dual decreasing balance rate each period times the beginning duration publication.
value now what does publication value equivalent? Cost much less gathered depreciation currently the
. starting duration book value as we begin is fifty thousand since that is the expense of.
fifty thousand minus built up devaluation zero we sanctuary'' t diminished anything yet best? But exactly how we did this is then we obtain twenty.
thousand dollars depreciation for 2 thousand thirteen okay are you with me? Currently um what is it for the following year well for.
2014 for 2014 we are going to take the dual declining equilibrium rate times the beginning.
of the year book value which in this situation is the expense of fifty thousand minus whatever.
we depreciated i9n this situation we depreciated twenty thousand fifty minus twenty is thierty.
is forty percent equals twelve thousand are you with me? Currently trainees tend to battle with.
this and so I have actually composed I put on'' t understand if it assists or otherwise'if it doesn ' t then wear ' t. usage it but I have made up this little worksheet to type of stroll individuals with this now for.
you folks in the house I have this on angel under the phase ten lessons now let'' s go in advance. and have a look at that as well as allows do the instance that was on the display utilizing this worksheet.
do your remember what the price was? It was fifty thousand bucks alright what was.
Wasn'' t it 5 thousand dollars? Someone dual check it.Okay so the estimated life we have that ' s. EL price is C so the initial thing we do is take one hundred percent separated by the approximated. C the price of fifty thousand times the dual declining balance price of forty percent as well as.
Well we take the price of fifty thousand minus. now this is the book worth this in the parenthesis right here is guide worth the cost minus. what have we depreciated until now we have actually dropped twenty thousand as well as we take that times the. double declining rate of forty percent and what does that equal that
equals twelve thousand. alright what concerning devaluation for several years 3 well right here in between my finger is going. to be the book worth possession which is the price of fifty thousand minus whatever we have actually depreciated.
well just how much did we decrease in year one twenty thousand just how much did we depreciate.
Twelve thousand all right so the book value of. It ' s eighteen thousand and also we are going to.
hundred dollars is that proper? Currently do you see exactly how the quantity of depreciation. we are taking each year goes down? Alright? , if that worksheet doesn ' t help you think with.
If you load this in you can draw, it after that by all ways wear ' t usage it now you can draw off.
another one off angel and also'utilize it again Dave Krug created that so every single time that made use of.
I obtain twenty 5 cents which behaves alright I obtained that opting for me alright so if you look.
at depreciation you will certainly see there is our twenty thousand which we determined there.
is our twelve thousand which we calculated our seventy two hundred and also if we would certainly keep.
going these would certainly be the amounts that we would certainly get currently keep in mind though we might only diminish. to well let me support below we have decreased listed below our approximated salvage value we can '
t. do that this finishing number has to be what our salvage value is so often we have. to compel that last number since we want a finishing publication worth when we are done dropping. equal to the approximated salvage value that we established up if it was zero it would be zero. In this situation it was five thousand yet you are not just going to maintain dropping. Things till they have unfavorable book worths? So sometimes we
have to require that devaluation. expenditure in the last year okay now a review of these approaches the
straight line method. provided us equivalent amounts of devaluation for each and every year the systems of production approach was.
Various quantities in each year depending on what our production was? And also the double decreasing equilibrium method it.
If you are not done at residence just time out, of these in course allowed ' s do quick research ten point six quick research 10 point 6 okay.Okay. When you are real fast research 10 six a fleet of cooled shipment truck, and press play. is needed on January 5 of two thousand eleven at a cost of

9 hundred and thirty. thousand dollars with an approximated beneficial life of eight years and also an approximated salvage. Value of one hundred and fifty thousand bucks calculate the depreciation cost for the. three years using the double declining balance
technique okay alright I wish to make certain we. get through this I could need to relocate a little quicker than I would have liked but what was. the price 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 fifty thousand alright so the. estimated life is eight years one hundred percent separated by eight equals twelve and also. a half percent we take that times 2 due to the fact that it ' s the dual decreasing balance technique as well as.
Okay depreciation in year one the publication value. Okay what concerning devaluation for year 3. I take 9 hundred and thirty thousand cost minus whatever it is we diminished year one.
Take that book worth times twenty 5 percent and also I ' m going to go in advance and also round this. And also the complete gathered depreciation now. Okay you can print those off on angel if you.

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