Depreciation

Section 1231 property is mainly personal depreciable property used in a trade or business that is held for more than one year. Section 1231 property also includes livestock and natural resources but does not include inventory and property held for sale in the ordinary course of business. For example, a forklift purchased by a wholesaler to move pallets is section 1231 property. If the same company purchases the same forklift with the intention to resell it to another business, because they sell forklifts

INVENTORY – PERIODIC INVENTORY SYSTEM In a Periodic Inventory System, no effort is made to keep up – to – date records of either the inventory or the cost of goods sold. Instead, these amounts are determined only periodically __ usually at the end of each year. It is used by very small businesses having manual accounting systems. Questions 1 – 3 (Meigns & Meigns), Question 4 (Fess & Warren) Question 1:- Mach IV Audio uses periodic inventory system. One of the

acknowledgment of depreciation illustrates the loss (decline) in fixed assets value (About, 2010). It is charged against gross profit, which gives an edge in the precision to the net income reported. According to Ben (2007) Income statement profit is relied on for the computation of tax, dividends and investment policies making it more convincing that it does reflects the truth in the entity’s performance. The Keating (1999) journal further expands on the essential of depreciation recognition against

Analysis of Cash Flow - Planet Karaoke Pub figures in baht Yr. 0 Rental income less less less Depreciation Increase in repair and maintenance expenses Decrease in net room revenue Additional Operating Income less Taxes NOPAT add less Depreciation Capital Expenditure Operating Cash Flow Discounted Operating Cash Flow @ 10.75% Yr. 1 Yr. 2 2,040,000 2,040,000 -192,500 -192500 -10,000 -10,000 -1,650,000 -1,683,000 187,500 -56,250 131,250 192,500 -770,000 -770,000 -770,000 323,750 292,325 300,650 245

incorporates only the operating flows resulting from the proposed facility. -3Table 2. Estimated annual operating flows. (thousands of dollars) UVA-F-0915 1998 Sales minus Cost of Goods Sold (60%) minus Operating Expenses Gross Profit minus Depreciation∗ Profit Before Tax minus Taxes (40%) Profit After Tax 1,000 −600 −50 350 −160 190 −76 114 1999 1,000 −600 −50 350 −160 190 −76 114 2000 1,000 −600 −50 350 −160 190 −76 114 2001 1,000 −600 −50 350 −160 190 −76 114 2002 1,000 −600 −50

| Annual Maintenance | | $1,000 | $1,000 | $1,500 | $1,500 | $2,000 | $2,000 | Battery Replacement2 | | | $3,000 | | $3,000 | | | Depreciation | In Year 1, depreciation is $5,000 plus 15% of the asset’s outlayFrom Year 2, depreciation is either * 30% of the asset’s book value; or * if the asset’s book value is less than $6,500, depreciation is the asset’s book value (i.e. asset is depreciated to zero once book value < $6,500) | Salvage | | $20,000 | $15,000 | $10,000 | $8,000

Type of Business WorldCom is a company that provides cheap local and long distance calling for customers. In the early 1990’s the company capitalized on fiber optic networks. It was able to provide basic phone services along with internet data services to large companies. As time went by they bought out other small business and by the time they merged with MCI, the company have become not only one of the largest telecommunications companies but the fastest growing company in a short period. History

Chapter one: Property, Plant and Equipment: A Brief Overview The purpose of International Accounting Standard 16 (IAS 16) is to outline the treatment for most types of property, plant and equipment. Initially, Property, Plant and Equipment will be realised at its cost and after that it will be measured either using a cost or revaluation model. The asset will be depreciated in such a way that the depreciable amount will be assigned over the period of its useful life on a methodical basis. [IASPlus

Cash $ 50,000 $ 70,000 Accounts receivable (net) $ 120,000 $ 180,000 Merchandise inventory $ 350,000 $ 280,000 Property plant, & equipment $ 400,000 $ 300,000 Less: Accumulated depreciation $ (170,000) $ (100,000) Total assets $ 750,000 $ 730,000 Accounts payable $ 250,000 $ 210,000 Income taxes payable $ 40,000 $ 10,000 Common stock $ 240,000 $ 240,000

Accounting 211 Study Guide for Final Exam Chapters 7 – 12 Chapter 7: 1. Terminology Accounting information system People, records, and methods that collect and process data from transactions and events, organize them in useful forms, and communicate results to decision makers Accounts payable ledger Subsidiary ledger listing individual creditor (supplier) accounts Accounts receivable ledger Subsidiary ledger listing individual customer accounts. Batch processing