Quiz 3 ACC 2101

Goodwill Formula

Goodwill = Purchase Price − Net Fair Value of Identifiable Assets (Fair Value of Assets − Fair Value of Liabilities)

Straight-Line Depreciation Formula (Annual Depreciation)

(Cost of total Asset − Salvage Value) / Useful Life = Annual Depreciation

Accumulated Depreciation

Annual Depreciation (# of X amount of Yrs)

Double-Declining Balance (DDB)

Book Value × (2 / Useful Life)

Activity-Based Depreciation

(Cost − Salvage Value) / Total Estimated Units × Units Used This Period

Accrued Interest Formula

Principle (Rate) (Time/12)

Book Value Formula

Cost of Asset - Balance in Accumulated Depreciation

Basket Purchase Formula

(Asset Fair Value / Total Fair Value) Total Purchase Price

When is contingent liability recognized?

Record if probable AND estimable. Does not count if case REASNONABLY POSSIBLE or is REMOTE

When is contingent gain recognized?

Only recognize when realized (conservatism principle); disclose if probable.

What components are excluded when we are capitalizing an asset?

Insurance, repairs, advertisining, employee training, anything that counts as an expense. Only captalize assets or accounts in the balance sheet