Chapter 3

tangible long term assets

physical assets used to generate revenue
property, plant, equipment

what kind of account is accumulated dep

contra asset
on balance sheet

where can you find gain/loss on asset disposal

income statement

criteria to record an asset

future benefit to cash flows
control access
transaction for control happened

journal entry for depreciation for the period

DR depreciation expense
CR accumulated dep.

journal entry for selling an asset at residual value

DR cash
DR accumulated dep
CR long term asset

journal entry for selling an asset less than residual value

DR cash
DR loss on asset disposal
DR accumulated dep
CR long term asset

journal entry for selling asset more than residual value

DR cash
DR accumulated dep
CR gain on asset disposal
CR long term asset

straight line dep

charges the cost of the asset evenly throughout its life

when is straight line dep used

when assets generate revenue evenly throughout its life

variable charge dep

charges the cost of the asset based on usage

when is variable charge dep used

when assets wear out based on usage

decreasing charge dep

charges the cost of the asset based on higher initial charges that decrease over its life

when is decreasing charge dep used

when assets generate more revenue in initial years

journal entry for financing asset by the bank

DR long term asset
CR long term debt

journal entry to record principal and interest payments

DR interest expense
DR long term debt
CR cash

journal entry for equity financing

DR long term asset
CR common shares