LESSON 18-1
Buying Plant Assets and
Paying Property Tax
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
RECORDING THE BUYING OF A
PLANT ASSET
page 535
January 3, 20X1. Paid cash for a display case, $3,250.00. Check No. 4.
1
2
3
4
1. Account title
2. Cost of the plant asset
3. Cash paid
4. Post
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-1
3
CALCULATING AND PAYING
PROPERTY TAX
page 536
February 1. Classic Parts, Inc., paid cash for property tax, $720.00.
Check No. 69.
Assessed
Value
×
Tax Rate
=
Annual
Property Tax
$60,000.00
×
1.2%
=
$720.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-1
4
TERMS REVIEW
page 537
 real property
 personal property
 assessed value
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-1
LESSON 18-2
Calculating Depreciation
Expense
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
STRAIGHT-LINE DEPRECIATION
page 538
Calculating Annual Depreciation Expense
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.
Original
Cost
$3,250.00
Estimated Total
Depreciation
Expense
$3,000.00
–
Estimated
Salvage Value
=
–
$250.00
=
÷ Years of Estimated =
Useful Life
÷
5
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
=
Estimated Total
Depreciation
Expense
$3,000.00 1
Annual
Depreciation
Expense
$600.00
2
LESSON 18-2
7
CALCULATING DEPRECIATION EXPENSE
page 539
FOR PART OF A YEAR
Calculating Partial Year’s Depreciation Expense
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.
Annual
Depreciation
Expense
$600.00
Monthly
Depreciation
Expense
$50.00
÷
Months in
a Year
=
Monthly
Depreciation
Expense
÷
12
=
$50.00
× Number of Months =
Asset Is Used
×
5
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
=
1
Partial Year’s
Depreciation
Expense
$250.00
2
LESSON 18-2
8
CALCULATING ACCUMULATED
DEPRECIATION
20X2 Accumulated +
Depreciation
$1,200.00
+
20X3
Depreciation
Expense
$600.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 540
= 20X3 Accumulated
Depreciation
=
$1,800.00
LESSON 18-2
9
CALCULATING BOOK VALUE
page 540
Original
Cost
–
Accumulated
Depreciation
=
Ending
Book Value
$3,250.00
–
$1,800.00
=
$1,450.00
Beginning
Book Value
–
Annual
Depreciation
=
Ending
Book Value
$2,050.00
–
$600.00
=
$1,450.00
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-2
LESSON 18-3
Journalizing Depreciation
Expense
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
11
PREPARING PLANT ASSET RECORDS
page 542
1 1. Write the information in
Section 1 when the
asset is purchased.
2 2. Do not write in Section
2 until the asset is
disposed of.
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-3
12
JOURNALIZING ANNUAL DEPRECIATION
EXPENSE
page 543
2
1
3
3
1. Depreciation Expense debit
2. Accumulated Depreciation credit
3. Record adjusting entry
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-3
13
POSTING AN ADJUSTING ENTRY FOR
DEPRECIATION EXPENSE
page 544
1. Debit Depreciation Expense.
2. Credit Accumulated
Depreciation.
1
2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-3
14
TERM REVIEW
page 545
 plant asset record
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-3
LESSON 18-4
Disposing of Plant Assets
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
16
SALE OF A PLANT ASSET FOR
BOOK VALUE
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.
1
1. Record an
entry in the
cash receipts
journal to
remove the
original cost.
2
2. Check the type of disposal, and write the
date, and disposal amount in Section 2 of the
plant asset record.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
17
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
2
3
1. Debit the depreciation expense account.
2. Credit the accumulated depreciation account.
3. Update Section 3 of the plant asset record.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
18
SALE OF A PLANT ASSET FOR MORE
THAN BOOK VALUE
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.
1
1. Remove the
original cost.
Record the gain
on the sale.
Record the cash
received from
the sale.
2
2. Check the type of disposal. Write the date and
disposal amount in Section 2 of the plant asset
record.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
19
SALE OF A PLANT ASSET FOR LESS
THAN BOOK VALUE
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.
1
2
1. Remove the original cost. Record the loss on the
sale. Record the cash received from the sale.
2. Check the type of disposal and write the date and
disposal amount in Section 2.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
20
TERMS REVIEW
page 550
 gain on plant assets
 loss on plant assets
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-4
LESSON 18-5
Declining-Balance Method
of Depreciation
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
22
CALCULATING DEPRECIATION USING THE
DOUBLE DECLINING-BALANCE METHOD
page 551
1
2
3
4
1.
2.
3.
4.
Calculate the double declining-balance rate.
Determine the annual depreciation expense.
Determine the ending book value.
Transfer the ending book value to the beginning book value for
the following year.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-5
23
CALCULATING THE LAST YEAR’S
DEPRECIATION EXPENSE
2
page 552
3
1
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-5
24
COMPARISON OF TWO METHODS OF
DEPRECIATION
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 553
LESSON 18-5
25
TERM REVIEW
page 554
 declining-balance method of depreciation
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 18-5