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Accounting For Long-Lived Assets: 15.514 Summer 2003 Session 7
Accounting For Long-Lived Assets: 15.514 Summer 2003 Session 7
Accounting For Long-Lived Assets: 15.514 Summer 2003 Session 7
Flows.
15.514 Summer 2003
Session 7
Accounting for long-lived assets
Matching Principle
B/S: I/S:
Capitalize Expense
Cash amount as
Disbursement amount as
fixed asset depreciation
(PPE)
Revenue recognized,
triggering matching
B/S: I/S:
Capitalize Expense
amount as part of amount as
inventory (e.g., COGS
manufacturing
overhead)
Session 7
Blockbuster Video:
! Straight-line Depreciation
< Annual Depreciation Expense
! Accelerated Depreciation
< Mostly confined to tax reporting
Session 7
Session 7
Yr 1:
Yr 2:
Yr 3:
.
Yr: 8
Example: At end of 7th year, when BV is $15K, sell Asset from last
example for scrap value of $2K.
Session 7
Additions
Total Depn
Disposals
! Tax Depreciation
< More accelerated
< No judgment
purposes?