CH 09

Financial Accounting: Tools for Business
Decision Making
Ninth Edition
Kimmel ● Weygandt ● Kieso
Chapter 9
Reporting and Analyzing Long-Lived Assets
Prepared by
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University of California, Santa Barbara
cause issues with your device. Westmont College
Chapter Outline
Learning Objectives
LO 1 Explain the accounting for plant asset expenditures.
LO 2 Apply depreciation methods to plant assets.
LO 3 Explain how to account for the disposal of plant
assets.
LO 4 Identify the basic issues related to reporting
intangible assets.
LO 5 Discuss how long-lived assets are reported and
analyzed.
Copyright ©2019 John Wiley & Sons, Inc. 2

Learning Objective 1
Explain the Accounting for Plant Asset
Expenditures
LO1 Copyright ©2019 John Wiley & Sons, Inc. 3

Plant Asset Expenditures
Plant assets are resources that have
• physical substance (a definite size and shape),
• are used in the operations of a business,
• are not intended for sale to customers,
• are expected to provide service to the company for a
number of years, except for land.
Referred to as property, plant, and equipment; plant and
equipment; and fixed assets.

Plant Assets
Plant assets are critical to a company’s success.

Valuing Plant Assets
• Historical cost principle
• Requires that companies record plant assets at cost
• Cost consists of all expenditures necessary to acquire
an asset and make it ready for its intended use
• Measured by the cash paid in a cash transaction or the
cash equivalent price paid
• Cash equivalent price is
• Fair value of asset given up or
• Fair value of asset received
whichever is more clearly determinable
Revenue and Capital Expenditures
• Revenue expenditures
• Costs incurred to acquire a plant asset that are
expensed immediately
• Capital expenditures
• Costs included in a plant asset account

Cost of Land (1 of 3)
• Include all necessary costs incurred in making land
ready for its intended use
• Increase the Land account with a debit
• Costs typically include
• Cash purchase price
• Closing costs such as title and attorney’s fees
• Real estate brokers’ commissions
• Accrued property taxes and other liens on land
assumed by purchaser at acquisition
Illustration: Hayes Company acquires real estate at a cash cost
of $100,000. The property contains an old warehouse that is
razed at a net cost of $6,000 ($7,500 in costs less $1,500
proceeds from salvaged materials). Additional expenditures
are the attorney’s fee, $1,000, and the real estate broker’s
commission, $8,000.
Required: Determine the amount to be reported as the cost
of the land.

Required: Determine amount to be reported as the cost of
the land.
Blank Land
Cash price of property ($100,000) $100,000
Net removal cost of warehouse ($6,000) 6,000
Attorney's fees ($1,000) 1,000
Real estate broker’s commission ($8,000) 8,000
Cost of Land $115,000

Cost of Land Improvements
• Includes all expenditures necessary to make the
improvements ready for their intended use
• Limited useful lives
• Expense by depreciating over the useful lives
• Examples: driveways, parking lots, fences, landscaping,
and underground sprinklers

Cost of Buildings (7 of 11)
• Includes all costs related directly to purchase or
construction
• Purchase costs
• Purchase price, closing costs such as attorney’s fees, title
insurance, etc. and real estate broker’s commission
• Remodeling and replacing or repairing the roof, floors,
electrical wiring, and plumbing
• Construction costs
• Contract price plus payments for architects’ fees, building
permits, and excavation costs

Cost of Equipment (2 of 3)
• Include all costs incurred in acquiring the equipment
and preparing it for use
• Costs typically include
• Cash purchase price
• Sales taxes
• Freight charges
• Insurance during transit paid by purchaser
• Expenditures for assembling, installing, and testing

Illustration: Lenard Company purchases a delivery truck at a
cash price of $22,000. Related expenditures are sales taxes
$1,320, painting and lettering $500, motor vehicle license
$80, and a three-year accident insurance policy $1,600.
Compute the cost of the delivery truck.
Blank Truck
Cash price $22,000
Sales taxes 1,320
Painting and lettering 500
Cost of Delivery Truck $23,820

Illustration: Lenard Company purchases a delivery truck at a
cash price of $22,000. Related expenditures are sales taxes
$1,320, painting and lettering $500, motor vehicle license
$80, and a three-year accident insurance policy $1,600.
Prepare the journal entry to record these costs.
Equipment 23,820
License Expense 80
Prepaid Insurance 1,600
Cash 25,500


Expenditures During Useful Life
Ordinary repairs
• Expenditures to maintain the operating efficiency
and productive life of the unit
• Debited to Maintenance and Repairs Expense
Additions and improvements
• Costs incurred to increase the operating efficiency,
productive capacity, or useful life of a plant asset
• Debited to the related plant asset account

To Buy or Lease?
• Lease
• A contractual agreement in which the owner of an
asset (lessor) allows another party (lessee) to use the
asset for a period of time at an agreed price
• Advantages of leasing
• Reduced risk of obsolescence
• Little or no down payment
• Shared tax advantages

Do It! 1: Cost of Plant Assets
Drummond Corp. purchases a delivery truck and incurs
the costs below. Explain how the company should
account for each of these costs.
Invoice cost of $15,000 cash Cost of truck
Sales taxes of $900 Cost of truck
Delivery costs of $500 Cost of truck
$200 for painting and lettering Cost of truck
$600 for an annual insurance policy Operating expense
$80 for a motor vehicle license Operating expense
Apply Depreciation Methods to Plant
Assets

Depreciation
• Process of allocating to expense the cost of a plant asset
over its useful life in a rational and systematic manner
• Process of cost allocation, not asset valuation
• Applies to land improvements, buildings, and equipment, not
land
• Allocated and depreciable, because the revenue-producing
ability of the asset will decline over the asset’s useful life
Accumulated depreciation
Depreciation expense
Reported on the balance sheet
Reported on the income
as a deduction from plant
statement
assets
Factors in Computing Depreciation

Selecting a Depreciation Method
Management selects the method it
believes best measures an asset’s
contribution to revenue over its
useful life.
1) Straight-line method
2) Declining-balance method
3) Units-of-activity method

Calculating Depreciation
Illustration: Bill’s Pizzas purchased a small delivery truck on
January 1, 2022.
Cost $13,000
Expected salvage value $1,000
Estimated useful life (in years) 5
Estimated useful life (in miles) 100,000
Required: Compute depreciation using:

(a) Straight-Line. (b) Units-of-Activity. (c) Declining-Balance.

Straight-Line Method (1 of 3)
Depreciation expense is same amount each year.

Straight-Line Method (2 of 3) *$13,000 − $2,400
Blank Computations Blank Blank End of Year
Depreciable Annual Accumulated Book
Year Cost x Rate = Expense Depreciation Value
2022 $12,000 x 20% = $ 2,400 $ 2,400 $10,600*
2023 12,000 x 20 = 2,400 4,800 8,200
2024 12,000 x 20 = 2,400 7,200 5,800
2025 12,000 x 20 = 2,400 9,600 3,400
2026 12,000 x 20 = 2,400 12,000 1,000
$12,000
Annual Journal Entry

Dec. 31 Depreciation Expense 2,400
Accumulated Depreciation 2,400


Straight-Line Method (3 of 3)
If the delivery truck was purchased on April 1, 2022.
Depreciable Annual Partial Depreciation Accum.
Year Cost x Rate = Expense x Year = Expense Deprec.
2022 $12,000 x 20% = $ 2,400 x 9/12 = $ 1,800 $1,800
2023 12,000 x 20 = 2,400 x = 2,400 4,200
2024 12,000 x 20 = 2,400 x = 2,400 6,600
2025 12,000 x 20 = 2,400 x = 2,400 9,000
2026 12,000 x 20 = 2,400 x = 2,400 11,400
2027 12,000 x 20 = 2,400 x 3/12 = 600 12,000
$12,000

Do It! 2a: Straight-Line Depreciation
On January 1, 2022, Iron Mountain Ski Corporation purchased a
new snow-grooming machine for $50,000. The machine is
estimated to have a 10-year life with a $2,000 salvage value. What
journal entry would Iron Mountain Ski Corporation make at
December 31, 2022, if it uses the straight-line method of
depreciation? Salvage Annual
Year Cost - Value x Rate = Expense
2022 $50,000 - $2,000 x 10% = $4,800
2022 Depreciation Expense 4,800

Dec. 31 Accumulated Depreciation 4,800


Declining-Balance Method (1 of 3)
• Accelerated method
• Decreasing annual depreciation expense over asset’s
useful life
• Double-declining-balance rate is double the straight-
line rate
• Rate applied to book value

Beginning Annual Accumulated Book
Year Book Value x Rate = Expense Depreciation Value
2022 $13,000 x 40% = $ 5,200 $ 5,200 $7,800 (a)
2023 7,800 x 40 = 3,120 8,320 4,680
2024 4,680 x 40 = 1,872 10,192 2,808
2025 2,808 x 40 = 1,123 11,315 1,685
2026 1,685 x 40 = 685 12,000 1,000
$12,000 (b)
(a) $13,000 − $5,200

(b) $1,685 x 40% = $674, expense adjusted to $685 to result in salvage value of $1,000.

Assume the delivery truck was purchased on April 1, 2022.
Beginning Annual Partial Depreciation Accum.
Year Book Value x Rate = Expense x Year = Expense Deprec.
2022 $13,000 x 40% = $ 5,200 x 9/12 = $ 3,900 $3,900
2023 9,100 x 40 = 3,640 x Blank = 3,640 7,540
2024 5,460 x 40 = 2,184 x Blank = 2,184 9,724
2025 3,276 x 40 = 1,310 x Blank = 1,310 11,034
2026 1,966 x 40 = 786 x = 786 11,820
2027 1,180 x 40 = 472 x = 180 12,000
$12,000 (a)
(a) Expense adjusted to $180 to result in salvage value of $1,000.

Units-of-Activity Method (1 of 2)
• Companies estimate total units of activity to calculate
depreciation cost per unit
• Expense varies based on units of activity
• Depreciable cost is cost less salvage value
Depreciable Total Units Cost

Cost ÷ of Activity = per Unit
$12,000 ÷ 100,000 = $0.12

Units-of-Activity Method (2 of 2) *$13,000 − $1,800
Miles Annual Accumulated Book
Year Driven x Rate = Expense Depreciation Value
2022 15,000 x $.012 = $ 1,800 $ 1,800 $11,200*
2023 30,000 x .012 = 3,600 5,400 7,600
2024 20,000 x .012 = 2,400 7,800 5,200
2025 25,000 x .012 = 3,000 10,800 2,200
2026 10,000 x .012 = 1,200 12,000 1,000
$12,000
Journal Entry
2022 Depreciation Expense 1,800
Dec. 31 Accumulated Depreciation 1,800


Management’s Choice: Comparison (1 of 2)
Straight- Declining- Units-of-
Year Line Balance Activity
2022 $ 2,400 $ 5,200 $ 1,800
2023 2,400 3,120 3,600
2024 2,400 1,872 2,400
2025 2,400 1,123 3,000
2026 2,400 685 1,200
$12,000 $12,000 $12,000
Annual depreciation expense varies, but total depreciation

expense is the same ($12,000) for the five-year period.

Management’s Choice: Comparison (2 of 2)

Depreciation and Income Taxes
• IRS does not require taxpayers to use the same
depreciation method on the tax return that is used in
preparing financial statements.
• IRS requires either
• Straight-line method
• Modified Accelerated Cost Recovery System
(MACRS)
• Special accelerated-depreciation method
• NOT acceptable under GAAP
Depreciation Disclosure in the Notes
Southwest Airlines
Notes to the Financial Statements
Property and equipment Depreciation is provided by the
straight-line method to estimated residual values over periods
ranging from 23 to 25 years for flight equipment.

Revising Periodic Depreciation (1 of 4)
• Accounted for in period of change and future periods
• Considered to be a change in estimate
• Not handled retrospectively
• Not considered to be an error

Illustration: Arcadia purchased equipment for $510,000 with
an estimated useful life of 10 years and a salvage value of
$10,000 at the end of that time. Depreciation has been
recorded for 7 years on a straight-line basis. In 2022 (year 8),
it determined that the total estimated life should be 15 years
with a salvage value of $5,000 at the end of that time.
Question:
What is the journal entry to correct the No Entry
prior years’ depreciation? Required

Calculation of depreciation expense for first 7 years.
Equipment cost $510,000
Salvage value − 10,000
Depreciable base 500,000
Useful life (original) ÷ 10 years
Annual depreciation $ 50,000
× 7 years = $350,000
Net book value at date of change in estimate (after 7 years).
Plant Assets:
Equipment $510,000
Accumulated depreciation 350,000
Net book value $160,000

Calculation of depreciation expense for 2022, year 8.
Net book value after year 7 $160,000
Salvage value (revised) − 5,000
Remaining life ÷ 8 years
Journal entry for 2022 and future years



Impairments
• Permanent decline in the fair value of an asset
• Asset is written down to its new fair value during the
year in which the decline in value occurs
• Avoids overstating the asset in the accounting records

Do It! 2b: Revised Depreciation (1 of 3)
Chambers Corporation purchased a piece of equipment for
$36,000. It estimated a 6-year life and $6,000 salvage value. Thus,
straight-line depreciation was $5,000 per year [($36,000 − $6,000)
÷ 6]. At the end of year three (before the depreciation adjustment),
it estimated the new total life to be 10 years and the new salvage
value to be $2,000.
Compute the revised depreciation.

Calculation of depreciation expense for first 2 years.
Equipment cost $ 36,000
Salvage value − 6,000
Useful life (original) ÷ 6 years
× 2 years = $10,000
Net book value at date of change in estimate (after 2 years).
Plant Assets:
Equipment $36,000
Accumulated depreciation 10,000
Net book value $26,000

Calculation of revised depreciation expense for remaining years.
Net book value after year 2 $26,000
Salvage value (revised) − 2,000
Remaining life ÷ 8 years
Journal entry for each remaining year



Explain How to Account for the
Disposal of Plant Assets

Disposal of Plant Assets
Three ways companies dispose of plant assets
Accounting for disposals

• Record depreciation up to the date of disposal
• Eliminate asset by
• Debiting Accumulated Depreciation, and
• Crediting the asset account
Determining Gain or Loss on the Sale of
Plant Assets
• Compare the book value of the asset with the
proceeds received from the sale
• If proceeds exceed the book value, a gain on
disposal occurs
• If proceeds are less than the book value, a loss on
disposal occurs

Accounting for Sale of Plant Assets (1 of 3)
Illustration: On July 1, 2022, Wright Company sells office
furniture for $16,000 cash. The office furniture originally cost
$60,000 and as of January 1, 2022, had accumulated
depreciation of $41,000. Depreciation for the first six months
of 2022 is $8,000. Wright records depreciation expense and
updates accumulated depreciation to July 1 as follows.
Jul. 1 Depreciation Expense 8,000



Cost of office furniture $60,000
Less: Accumulated depreciation ($41,000 + $8,000) 49,000
Book value at date of disposal 11,000
Proceeds from sale 16,000
Gain on disposal of plant asset $ 5,000
Wright records the sale as follows on July 1.
Jul. 1 Cash 16,000

Equipment 60,000
Gain on Disposal of Plant Assets 5,000

Illustration: Assume that instead of selling the office furniture
for $16,000, Wright sells it for $9,000.
Cost of office furniture $60,000
Less: Accumulated depreciation ($41,000 + $8,000) 49,000
Book value at date of disposal 11,000
Proceeds from sale 9,000
Loss on disposal of plant asset $ 2,000
Jul. 1 Cash 9,000

Loss on Disposal of Plant Assets 2,000
Equipment 60,000

Retirement of Plant Assets
• No cash is received
• Decrease Accumulated Depreciation with a debit for
full amount of depreciation taken over life of asset
• Decrease asset account with a credit for original cost
of asset

Do It! 3: Plant Asset Disposal (1 of 2)
Overland Trucking has an old truck that cost $30,000 and has
accumulated depreciation of $16,000.
Assume two different situations:
1. The company sells the old truck for $17,000 cash.
2. The truck is worthless, so the company simply retires it.
What entry should Overland use to record scenario 1?
Cash 17,000
Equipment 30,000
Gain on Disposal of Plant Assets 3,000

Do It! 3: Plant Asset Disposal (2 of 2)
Overland Trucking has an old truck that cost $30,000 and has
accumulated depreciation of $16,000.
Assume two different situations:
1. The company sells the old truck for $17,000 cash.
2. The truck is worthless, so the company simply retires it.
What entry should Overland use to record scenario 2?
Loss on Disposal of Plant Asset 14,000
Equipment 30,000

Identify the Basic Issues Related to
Reporting Intangible Assets

Intangible Assets
• Are rights, privileges, and competitive advantages that
result from ownership of long-lived assets that do not
possess physical substance
• May have a limited or an indefinite life
• Common types of intangibles
• Patents • Trademarks
• Copyrights • Trade names
• Franchises or licenses • Goodwill

Accounting For Intangibles
Limited-life intangibles
• Amortize to expense
• Credit asset account or accumulated amortization
Indefinite-life intangibles
• No foreseeable limit on time asset is expected to
provide cash flow
• No amortization

Cost of Patents
• Exclusive right to manufacture, sell, or otherwise
control an invention for a period of 20 years from
date of grant
• Capitalize costs of purchasing a patent and amortize
over its 20-year life or its useful life, whichever is
shorter
• Expense any R&D costs in developing a patent
• Legal fees incurred successfully defending a patent
are capitalized to Patent account

Amortizing Patents
Illustration: National Labs purchases a patent at a cost of $60,000
on June 30. National estimates the useful life to be eight years.
Prepare the journal entry to record the amortization for the six-
month period ended December 31.
Cost $60,000
Useful life ÷ 8
6 months × 6/12
Amortization $ 3,750
Dec. 1 Amortization Expense 3,750

Patents 3,750

Research and Development Costs
• Expenditures that may lead to
• Patents
• Copyrights
• New processes
• New products
• All R&D costs are expensed when incurred

Copyrights
• Gives owner exclusive right to reproduce and sell an
artistic or published work
• Granted for life of creator plus 70 years
• Capitalize costs of acquiring and defending
• Amortized to expense over useful life

Trademarks and Trade Names
• Word, phrase, jingle, or symbol that distinguishes or
identifies a particular enterprise or product
 Wheaties, Monopoly, Sunkist, Kleenex, Coca-Cola,
Big Mac, and Jeep
• Legal protection for indefinite number of 20-year
renewal periods
• Capitalize acquisition costs
• No amortization

Franchises
• Contractual arrangement between a franchisor and a
franchisee
 Toyota, Shell, Subway, and Marriott are
franchises
• Franchise (or license) with a limited life should be
amortized to expense over life of franchise
• Franchise with an indefinite life should be carried at
cost and not amortized

Goodwill
• Includes exceptional management, desirable location,
good customer relations, skilled employees, high-
quality products, etc.
• Only recorded when an entire business is purchased
• Goodwill is recorded as the excess of ...
• FMV of identifiable net assets acquired over
• Purchase price
• Internally created goodwill should not be capitalized

Do It! 4: Classification Concepts (1 of 3)
Match the term most directly associated with each statement.
Copyright Amortization
Intangible assets Franchise
Research and development costs
1. The allocation to expense of the cost of an

intangible asset over the asset’s useful life. Amortization
2. Rights, privileges, and competitive

advantages that result from the ownership Intangible
of long-lived assets that do not possess assets
physical substance.
3. An exclusive right granted by the federal

government to reproduce and sell an artistic Copyright
or published work.
4. A right to sell certain products or services or
to use certain trademarks or trade names Franchise
within a designated geographic area.
5. Costs incurred by a company that often Research and

lead to patents or new products. These development
costs must be expensed as incurred. costs

Discuss How Long-Lived Assets Are
Reported and Analyzed

Statement Presentation of Long-Lived Assets
Artex Company
Balance Sheet (partial)
(in thousands)
Current assets
Cash $ 430
Accounts receivable 100
Inventory 910
Total current assets $ 1,440
Property, plant, and equipment
Land 920
Buildings $7,600
Less: Accumulated depreciation—buildings 500 7,100
Equipment 3,870
Less: Accumulated depreciation—equipment 620 3,250
Total property, plant, and equipment 11,270
Intangible assets
Patents 440
Trademarks 180
Goodwill 900 1,520
Total assets $14,230

Return on Assets In Millions
Net income, 2017 $1,147
Use this information for Total assets, 12/31/17 9,781
JetBlue to calculate return
Total assets, 12/31/16 9,323
on assets for 2017.
Net sales, 2017 7,015
Indicates the amount of net income generated by each dollar of assets

Asset Turnover In Millions
Net income, 2017 $1,147
Use this information for Total assets, 12/31/17 9,781
JetBlue to calculate asset
Total assets, 12/31/16 9,323
turnover for 2017.
Net sales, 2017 7,015
Indicates how efficiently a company uses its assets to generate sales

Profit Margin Revisited (1 of 2)
Indicates how effective a company is in turning its sales
into income—that is, how much income each dollar of
sales provides

Profit Margin Revisited (2 of 2)
Southwest was more effective at generating sales from

its assets, while JetBlue was better at deriving profit
from its sales.

Do It! 5: Asset Turnover
Paramour Company reported net income of $180,000, net
sales of $420,000, and had total assets of $460,000 on
January 1, 2022, and total assets on December 31, 2022, of
$540,000. Determine Paramour’s asset turnover for 2022.
Net Sales ÷ Average Total Assets = Asset Turnover
$460,000 + $540,000
$420,000 ÷ = 0.84
2

Compute Periodic Depreciation Using
the Declining-Balance Method and the
Units-Of-Activity Method
Previously illustrated in Learning Objective 2

Compare the Accounting For Long-lived
Assets Under GAAP and IFRS

A Look at IFRS (1 of 7)
Similarities
• The definition for plant assets for both IFRS and GAAP is
essentially the same.
• Both IFRS and GAAP follow the historical cost principle when
accounting for property, plant, and equipment at date of
acquisition.
• Cost consists of all expenditures necessary to acquire the
asset and make it ready for its intended use.

Similarities
• Under both IFRS and GAAP, interest costs incurred during
construction are capitalized. Recently, IFRS converged to
GAAP requirements in this area.
• The accounting for subsequent expenditures (such as ordinary
repairs and additions) is essentially the same under IFRS and
GAAP.
• IFRS also views depreciation as an allocation of cost over an
asset’s useful life. IFRS permits the same depreciation
methods (e.g., straight-line, accelerated, and units-of-activity)
as GAAP.

Similarities
• Under both GAAP and IFRS, changes in the depreciation
method used and changes in useful life are handled in current
and future periods. Prior periods are not affected.
• G A A P recently conformed to international standards in the
accounting for changes in depreciation methods.
• The accounting for plant asset disposals is essentially the same
under IFRS and GAAP.
• The definition of intangible assets is essentially the same
under IFRS and GAAP

Similarities
• The accounting for exchanges of nonmonetary assets has
recently converged between IFRS and GAAP. GAAP now
requires that gains on exchanges of nonmonetary assets be
recognized if the exchange has commercial substance. This is
the same framework used in IFRS.
Differences
• IFRS uses the term residual value rather than salvage value to
refer to an owner’s estimate of an asset’s value at the end of
its useful life for that owner.

Differences
• IFRS allows companies to revalue plant assets to fair value at
the reporting date.
• Companies that choose to use the revaluation framework
must follow revaluation procedures.
• If revaluation is used, it must be applied to all assets in a
class of assets.
• Assets that are experiencing rapid price changes must be
revalued on an annual basis, otherwise less frequent
revaluation is acceptable.

Differences
• IFRS requires component depreciation. Component
depreciation is allowed under G A A P but is seldom used.
• Component depreciation specifies that any significant parts
of a depreciable asset that have different estimated useful
lives should be separately depreciated.

Differences
• As in GAAP, under IFRS, the costs associated with research and
development are segregated into the two components.
• Costs in the research phase are always expensed under
both IFRS and GAAP.
• Under IFRS, however, costs in the development phase are
capitalized as Development Costs once technological
feasibility is achieved.
• IFRS permits revaluation of intangible assets (except for
goodwill). GAAP prohibits revaluation of intangible assets.

Copyright
Copyright © 2019 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Act without the express written permission of the
copyright owner is unlawful. Request for further information should be addressed to the
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for his/her own use only and not for distribution or resale. The Publisher assumes no
responsibility for errors, omissions, or damages, caused by the use of these programs or
from the use of the information contained herein.
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Financial Accounting: Tools for Business

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Required: Compute depreciation using:

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Annual Journal Entry

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2022 Depreciation Expense 4,800

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(a) $13,000 − $5,200

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(a) Expense adjusted to $180 to result in salvage value of $1,000.

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Depreciable Total Units Cost

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Annual depreciation expense varies, but total depreciation

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LO2 Copyright ©2019 John Wiley & Sons, Inc. 37

LO2 Copyright ©2019 John Wiley & Sons, Inc. 38

LO2 Copyright ©2019 John Wiley & Sons, Inc. 39

Journal entry for 2022 and future years

Dec. 31 Depreciation Expense 19,375

LO2 Copyright ©2019 John Wiley & Sons, Inc. 40

LO2 Copyright ©2019 John Wiley & Sons, Inc. 41

LO2 Copyright ©2019 John Wiley & Sons, Inc. 42

LO2 Copyright ©2019 John Wiley & Sons, Inc. 43

Journal entry for each remaining year

Dec. 31 Depreciation Expense 3,000

LO2 Copyright ©2019 John Wiley & Sons, Inc. 44

LO3 Copyright ©2019 John Wiley & Sons, Inc. 45

Accounting for disposals

LO3 Copyright ©2019 John Wiley & Sons, Inc. 47

Jul. 1 Depreciation Expense 8,000

LO3 Copyright ©2019 John Wiley & Sons, Inc. 48

Wright records the sale as follows on July 1.

Jul. 1 Cash 16,000

LO3 Copyright ©2019 John Wiley & Sons, Inc. 49

Jul. 1 Cash 9,000

LO3 Copyright ©2019 John Wiley & Sons, Inc. 50

LO3 Copyright ©2019 John Wiley & Sons, Inc. 51

LO3 Copyright ©2019 John Wiley & Sons, Inc. 52

LO3 Copyright ©2019 John Wiley & Sons, Inc. 53