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Plant Assets (Disposing of Plant Assets (Exchanging - Gain (DR New…
Plant Assets
Disposing of Plant Assets
Throwing it out
DR Accumulated Depreciation
DR Loss on Disposal
CR Plant Asset
Selling at book value
DR Cash
DR Accumulated Depreciation
CR Plant Asset
Selling above book value
DR Cash
DR Accumulated Depreciation
CR Plant Asset
CR Gain on Disposal
Selling below book value
DR Cash
DR Accumulated Depreciation
DR Loss on Disposal
CR Plant Asset
Exchanging - Gain
DR New Equipment
DR Accumulated Depreciation
CR Old Equipment
CR Cash
CR Gain on Disposal
Exchanging - Loss
DR New Equipment
DR Accumulated Depreciation
DR Loss on Disposal
CR Old Equipment
CR Cash
Depreciation Methods
Straight-Line
(Cost - Residual Value)/(Useful Life)
Equal amount each period
Used for things like buildings
Units-of-Production
((Cost - Residual Value)/(Useful Life in Units))*(# of Units)
Depreciation matches wear and tear
Follows the matching principle more closely
Used for things like vehicles and machinery
Double-Declining Balance
(Cost - Accumulated Depreciation)*(2/(Useful Life))
Produces more depreciation earlier and less as the asset gets older
Used for things that become obsolete quickly like computers
Natural Resources & Intangibles
Natural Resources
Depletion calculated per unit
DR Depletion Expense
CR Accumulated Depletion
Intangibles
Amortization calculated using the straight-line method with $0 residual value
DR Amortization Expense
CR Asset account (since there's nothing to dispose of, they just let it run down to 0)
Goodwill
DR Assets
DR Goodwill
CR Liabilities
CR Cash
What's part of the asset account?
DR plant asset
Capital expenses to get the asset up and running (delivery/installation costs, taxes on the asset, etc)
Repairs that extend the asset's usable life
DR other accounts
Land improvements (fencing, signs, etc)
Routine maintenance (changing tires/fluids, etc)