Topic8:LearningObjectives(LO)

ACCT1501
Semester2,2016
Week 8
Introduction to Inventory
and Non-Current Assets

Exam!

LO1:Explainthedifferencebetweenperiodicandperpetual
inventorysystemsandpreparetheapplicablejournalentries
LO2:Describethethreecostflowassumptionsforinventory:
FIFO,LIFOandweightedaveragecost
LO3:Accountforthecostofacquisitionofnoncurrentassets
LO4: Explainandapplydifferentmethodsofdepreciationand
recordthesale/disposalofadepreciablenoncurrentasset
EssentialreadingforWeek8
TrotmanGibbins&CarsonChapter9pp.357374
TrotmanGibbins&CarsonChapter10pp.385398

Conor Clune

2 chapters
2

GoodsandServices wearefocussingongoods

Inventorycards perpetualinventorysystem

Services providedbydentists,accountants,lawyers

InventoryCard
Additions

Goods(Products,Stock,Inventory)
Buyandsellreadymadeproducts
Manufactureandsellgoods/products

Inventory
Anasset!

Withdrawals

LO1

Monitor the levels of stock.

InventoryControlSystems

1.PerpetualMethod

LO1

Arecordkeepingchoice! (2)

LO1

Continuousrecords:

1. Perpetualsystemmaintainscontinuousrecordsontheflow
ofunitsofinventoryforalltransactions(Balancesfor
InventoryandCOGSalwaysintheaccountingsystem)

Beginninginventorycost(oftensupportedbyaphysicalcount:internalcontrol)
+Inventoryacquiredduringtheperiod(fromtransactionrecords)
Costofinventorysold(COGSrecords)
=Endinginventorycost(supportedbyphysicalcount:internalcontrol)

complex
purchase - add
sale - minus

2. Periodicsystemdeterminesinventorybyphysicalcountat
endofperiodandCOGSisdeterminedasopeninginventory
pluspurchaseslessclosinginventory(BalancesforInventory
andCOGSintheaccountingsystematperiodend) doesnt worry about during the year

Whatifthereisashortageofinventory???
Forexample

counts at the end only - closing

5

1.PerpetualMethod Example

1.PerpetualMethod ProsandCons

LO1
$

Inventory (opening)

15 000

Add: Inventory acquired

60 000

Available for Sale

75 000

Less: Cost of goods sold

50 000

Inventory (closing)

25 000

Inventory on hand (physical count)

20 000

Inventory adjustment?

Providesbetterinternalcontrol
Constantly checking inventory
Stocklosseseasilydetermined
Howeveritscostlyandnotsuitableforalltypesof
goods,e.g.coal

Its short, so must recognise

it as an expense

Expensive

JournalEntry
Dr Inventoryshortageexpense5000
Cr

Stock take at the end of the year - internal control.

Inventory5000

Can check internal control ability - employee/customer theft

LO1

Continuous record - usually on Computer

1.PerpetualMethod RecordKeeping

LO1

2.PeriodicMethod

Exampleacompanyboughtinventoryfor$100cash,thensold
itfor$500cash.

CalculatingCOGS
+Beginninginventory(count)
+ Purchases(companyrecords)
Endinginventory(count)
= Inventorysold(COGS)

Purchases:
DrInventory
CrCash/Payable

LO1

$100
$100

AllsalesofinventoryrequireTWOentries:
Revenuefromsale
DrCash/Receivable
CrSales
Expensefromsale
DrCostofGoodsSold
CrInventory

Count at the end of the year

$500
$500
$100
$100

10

2.PeriodicMethod RecordKeeping

+
+

2.PeriodicMethod RecordKeeping

LO1

COGSundertheperiodicmethod
Beginninginventory
Debit
Purchases
Debit
Credit
Endinginventory
Debit
COGS

LO1

SalesofinventoryrequireonlyONEentry:
DrCash/Receivable
$500
CrSalesrevenue
$500
Notethedifferencecomparedtowhatyoureusedto
seeingwiththeperpetualinventorysystem.
Costofsalesisnotdeterminedforeverysalestransaction
Costofsalesisdeterminedintotalattheendoftheperiod

COGS at end of year

11

12

PerpetualorPeriodic?

MCQ

LO1

1 Which of the following statements about the perpetual inventory

control method is NOT true?
A. When a sale is made, cost of goods sold is increased.
B. When inventory is purchased, it is treated as an expense.
C. A separate record is kept for each item of inventory.
D. An inventory count can reveal inventory losses.

Recordkeepingchoice,notareportingchoice
Perpetual - Can recognise Stock-shortage
Natureofinventory
Computersystemtechnology

2 Which of the following is NOT an advantage of the perpetual

inventory system over the periodic inventory system?
A. The perpetual inventory system discloses inventory shortages.
B. The perpetual inventory system is less costly to maintain.
C. The perpetual inventory system provides a continuous record of cost
of goods sold.
D. The perpetual inventory system provides better control of the asset
inventory.

e.g.opticalscanners

Costbenefit

13

how to value

Lowerofcostandnetrealisable value
Costcomprises:

Untilnowwevedealtwithsimplecases

LO1

E.g.,Inventory=$100000.

value @ cost

Wehave10000units.
Weassumeapurchasepriceof$10perunit

Costofpurchase
Add:Purchase price+Import dutiesandothertaxes+
Inward transportandhandlingcosts+Any otherdirectly
attributablecostsofacquisition
Less: tradediscounts,rebatesandothersimilaritems
ConversionCosts(weeks1112) thisisifinventoriesare
manufacturedandincludescostofproduction

Notincluded inthecostofinventory:

However
Purchasesaremadethroughouttheyearandpricesmay
change
E.g.5000unitsat$9eachand5000unitsat$11each

buy ready made - Coles - no value added.

buy table: buy bar - assemble - cost of labour to assemble

Administrationcosts,sellingcosts &storagecosts
15

advanced pc - daily

14

Inventory measurementrule

MCQ!!!!

when sold

office rent

16

Example:InventoryatcostandCOGS

CostFlowAssumptions

LO2

Threemajortypesofcostflowassumptions

Imaginewepurchasedthefollowing:
On30/1/15 3units@$15perunit
On30/5/15 3units@$20perunit

FirstIn,FirstOutmethod(FIFO)
LastIn,FirstOutmethod(LIFO)
WeightedAveragemethod(ormovingaverage)

Soon30/6/15wehave
3unitsx$15=$45
3unitsx$20=$60

Soincombination:

WhatistheCOGSifwethensell4units?

17

Cost Flow Assumption

Periodic control

FIFO

FIFO

Perpetual control
FIFO

LIFO

Periodic LIFO

Perpetual LIFO

Average

Weighted average

Moving average

18

Firstin,FirstOut(FIFO)

LastIn,FirstOut(LIFO)

LO2

1st 3@$15/unit

2nd 3@$20/unit

LO2

Assumeslastunitspurchased=Firstunitssold

Assumesfirstunitspurchased=firstunitssold
Assumesendinginventorycontainsunitspurchasedmostrecently
Note FIFOresultsin:
Higherprofitlevelintimesofrisingprices(relativetoLIFOand
weightedaverage)
Closinginventorybalanceclosertocurrentcost(relativetoLIFO
andweightedaverage)
Suitableforperishableitems,electronics,etc

19

LO2

Assumesendinginventorycontainsunitspurchasedearliest
Note:
Intimesofrisingprices,resultsinlowervalueofending
inventory,higherCOGS lowerprofit(nicetaximplication)
Oftendoesnotmatchphysicalflow
Closinginventorybalancemaynotberelevant
NotpermittedunderAustralianaccountingstandards
(permittedintheUnitedStates)
CoGs = 3*$20 + 1*$15 = $75
Closing Stock = $30

Sell 4 Units
CoGs = $65 = 3*$15 + 1*$20
Closing Stock = $40

1st 3@$15/unit
20

2nd 3@$20/unit

WeightedAverage

FIFOvs.LIFOvs.WeightedAverage

LO2

Aweightedaveragecostiscalculated
Total cost of goods remains the same.
($15x3)+($20x3)=$105
$105/6=$17.50perunit
Recalculate every time you
Whenusingaperpetualinventorycontrolsystem,itis purchase goods. Not when sell
referredtoasthemovingaveragemethod
Note:
Simpletoapplyandlesssubjecttoprofitmanipulation
Appropriateforsimilarproductsandnonexpiryitems

1st 3@$15/unit

2nd 3@$20/unit

LO2

Whenpricesarechanging,eachmethodwillprovideadifferent
endinginventoryandCOGSvalue
Butnotethatthesumofthesetwoitemswillalwaysbethesame,
nomatterwhatthemethod!
Acostcaneitherbeanassetoranexpense
TotalCost=asset+expense
Soattheendoftheperiod,TotalCost=Inventoryonhand+COGS

CoGs = 4*$17.5 = $70

Closing Stock = $35

21

22

Important!Nomatterwhatcostflowassumptionismade.

Important!Nomatterwhatcostflowassumptionismade.

Inventorythatwasavailabletosellduringtheyear=gone+stillhere
i.e.,Beginninginventory+Purchases=COGS+Endinginventory
1st 3@$15/unit
$Value

2nd 3@$20/unit

$Value
$(45+60)=$105

FIFOCOGS=3x$15+1x$20=$65
FIFOEndinginventory=2x$20=$40
Totalvalue=$105

Imaginewesell4units
1st 3@$15/unit

2nd 3@$20/unit
LIFOCOGS=3x$20+1x$15=$75
LIFOEndinginventory=2x$15=$30
Totalvalue=$105

$(45+60)=$105
Imaginewesell4units

23

24

TYPICAL EXAM QUESTION

LectureExample
Details
Openingstock
Purchased
Sold
Purchased
Sold
Total

LectureExample

LO2

Date

Units

1/1/15
15/1/15
17/1/15
28/1/15
30/1/15

UnitCost TotalCost

200
300

$2
$3

$400
$900

500

$4

$2000

Units
Sold

Details
Openingstock
Purchased
Sold
Purchased
Sold
Total

250

1000

400
650

$3300

DetermineCOGS andendinginventoryvalueunder
(1)periodic and(2)perpetualsystem:
(a)FIFO
(b)LIFO
(c)WeightedAverage

Units

1/1/15
15/1/15
17/1/15
28/1/15
30/1/15

UnitCost TotalCost

200
300

$2
$3

$400
$900

500

$4

$2000

Units
Sold

250

1000

400
650

$3300

Totalunitssold=650
Closinginventory=350

25

26

LectureExample Periodic
Details

Date

Openingstock
Purchased
Purchased
Total

1/1/15
15/1/15
28/1/15

Units
200
300
500
1000

LectureExample 1(a)FIFOPeriodic

LO2

Unit
Cost
$2
$3
$4

TotalCost
$400
$900
$2000
$3300

Units
sold

200@$2=400

50 + 250 300@$3=900
150@$4= 600
1900

Beginning Inventory

200

+ Purchases

800

Ending Inventory

350

= Inventory Sold

650

28

LO2

Units
Unitcost
o/b200
$2
Purchased300
$3
Purchased 500
$4

Sold650units

Units

27

Date

LO2

Totalunits1000

$3300

COGS(650unitsasabove)

$1900

Endinginventory(350units@$4)
The rest are gone ($2 / $3)

$1400

LectureExample 1(b)LIFOPeriodic

LO2

LectureExample 1(c)WeightedAveragePeriodic

Units
Unitcost
o/b200
$2
Purchased300
$3
Purchased 500
$4

Sold650units
500@$4=2000
150@$3=450
2450

Totalunits1000

Units

TotalCost=$3,300
TotalUnits=1000
WAcost/unit=$3.30
Total cost / Total units

$3300

LO2

UnitCost TotalCost

200
300
500
1,000

$2
$3
$4

$400
$900
$2000
$3300

Sold650units
COGS(650unitsasabove)

$2450

Endinginventory(150@$3+200@$2)

COGS(650x$3.30)
EndingInv(350x$3.30)

$850

$2145
$1155

$4 are gone
29

30

LectureExample:NowforthePerpetual method!
Details
Openingstock
Purchased
Sold
Purchased
Sold
Total

Date
1/1/15
15/1/15
17/1/15
28/1/15
30/1/15

Units

UnitCost TotalCost

200
300

$2
$3

$400
$900

500

$4

$2000

LectureExample 2(a)FIFOPerpetual

LO2

Units
Sold

Details
Openingstock
Purchased
Sold
Purchased
Sold
Total

250

1000

$3300

400
650

DetermineCOGS andendinginventoryvalueunder
(1)periodic and(2)perpetualsystem:
(a)FIFO
(b)LIFO
(c)WeightedAverage
31

32

Date
1/1/15
15/1/15
17/1/15
28/1/15
30/1/15

Units

LO2

UnitCost TotalCost

200
300

$2
$3

$400
$900

500

$4

$2000

Units
Sold

250

1000

$3300

400
650

LectureExample 2(a)FIFOPerpetual

Date

LectureExample 2(a)FIFOPerpetual

LO2

PURCHASES
COGS
ENDINGSTOCK/INV.
Units Unit Total Units Unit$ Total Units Unit$ Total
$
$
$
$

1/1
15/1

200

400

17/1

Date

Always: Opening stock

1/1
15/1

PURCHASES
COGS
ENDINGSTOCK/INV.
Units Unit Total Units Unit$ Total Units Unit$ Total
$
$
$
$
300

200
200
300

900

2
2
3

400
400
900

Make calculations
as sale occurs, not
at the end of the
period (periodic)

28/1
30/1

33

34

LectureExample 2(a)FIFOPerpetual

Date
1/1
15/1
17/1

LectureExample 2(a)FIFOPerpetual

LO2

PURCHASES
COGS
ENDINGSTOCK/INV.
Units Unit Total Units Unit$ Total Units Unit$ Total
$
$
$
$
300

900
200
50

2
3

400
150

200
200
300

2
2
3

400
400
900

250

750

Date
1/1
15/1

30/1

36

LO2

PURCHASES
COGS
ENDINGSTOCK/INV.
Units Unit Total Units Unit$ Total Units Unit$ Total
$
$
$
$
300

900

17/1

250 units sold

28/1

35

LO2

500

200
50

2
3

400
150

250
150

3
4

750
600

2000

200
200
300

2
2
3

400
400
900

250
250
500
350

3
3
4
4

750
750
2000
1400

LectureExample 2(a)FIFOPerpetual

Date
1/1
15/1

PURCHASES
COGS
Date Units Unit Total Units Unit Total
cost cost
cost
cost

PURCHASES
COGS
ENDINGSTOCK/INV.
Units Unit Total Units Unit$ Total Units Unit$ Total
$
$
$
$
300

900

17/1
28/1

LectureExample 2(b) LIFOPerpetual

LO2

500

200
50

2
3

400
150

250
150

3
4

750
600
1900

2000

30/1
TOTAL

200
200
300

2
2
3

400
400
900

250
250
500
350

3
3
4
4

750
750
2000
1400

1/1
15/1

300

900

500

2000

ENDINGSTOCK/INV.
Units
Unit Totalcost
cost

17/1
28/1

400 units sold

250

750

400

1600
2350

30/1

1400
TOTAL

37

LO2

200
200
300
200
50
200
50
500
200
50
100

2
2
3
2
3
2
3
4
2
3
4

400
400
900
400
150
400
150
2000
400
150
400
950

38

Periodic - Weighted Average

Perpetual - Moving Average

LectureExample 2(c) MovingAveragePerpetual

Date
1/1
15/1

PURCHASES
COGS
Units Unit Total Units Unit Total
cost cost
cost
cost
300

900

ENDINGINV.
Unit
Total
cost
cost
200
2
400
*500
2.60
1300

28/1

250
500

2.60

650

2000

250

2.60

650

*750

3.53

2650

FIFO

Use the current

TC and TU
for sale

($650+$2000)/(250+500)
= $3.53/unit

30/1

400
TOTAL

39

3.53 1413.33
2063.33

350

LO2

Periodic

Units

($400+$900)/(200+300)
= $2.60/unit

17/1

ComparetheResults

LO2

3.53 1236.63
1236.67
40

LIFO

Perpetual
WA

FIFO

LIFO

MA

COGS

1900

2450

2145

1900

2350

2063

Ending
Inv

1400

850

1155

1400

950

1237

TOTAL

3300

3300

3300

3300

3300

3300

NonCurrentAssets

ACCT1501
Semester2,2016

LO3

Heldbycompanyformorethan12months
Usedtogeneraterevenue
Examples

10 Minute Break

Property,plant,andequipment
Intangibleassets - branding
Longterminvestments

42

Property,PlantandEquipment(PPE)

PPE Mainpointsofinterest

LO3

Property,plantandequipmentaretangible itemsthat:

1.
2.
3.
4.

(a) Areheldforuseintheproductionorsupplyofgoodsor
services,forrentaltoothers,orforadministrative
purposes,and
(b) Areexpectedtobeusedduringmorethanoneperiod.

43

44

InitialcostofPPE
Depreciationofassets
Additionalexpenditureonassetsafteracquisition
Recordingthedisposalofassets

LO3

1.

InitialCostofPPE

1.

LO3

Costatacquisition:
RecordedintheBalanceSheetatcost

Costincludes:

at the end

45

Cost is capitalised - e.e. recorded on balance sheet not income statement

Dr. Equipment
Cr. Cash

46

Example

PPE Mainpointsofinterest

LO3

1.
2.
3.
4.

A used machine with a purchase price of $100 000, requiring an

overhaul costing $8000, installation costs of $4000, delivery costs
of $2000, would have a cost base of:
A. $104 000.
B. $108 000.

InitialcostofPPE
Depreciationofassets
Additionalexpenditureonassetsafteracquisition
Recordingthedisposalofassets

C. $112 000.
D. $114 000.

What can you capitalise is a common question.

47

LO3

Invoicepriceofmachinery
Purchase(andother)taxes
Freight(deliverycosts)
Installationcosts
Setupcosts
Architectsfees

capitalised

Purchaseprice
Anycostsdirectlyattributabletobringingtheassettothe
locationandconditionnecessaryforittobeusedinthe where we can use it
mannerintendedbymanagement
Estimateofcostsassociatedwithdismantlingandremoving
theitemand/orrestorationcosts

InitialCostofPPE Examples

All NCA are only used for a specific period of time.

Are write down - depreciation.

48

LO3

2.

Depreciation

2.Chargingdepreciation

LO4

Accumulateddepreciation(B/S)showsall depreciation
chargedagainstanassettodate.
Depreciationexpense(I/S)showsonlythisyears allocation

PPEusuallyhasalimitedusefullife:
Reductioninusefulnessingeneratingrevenue
Valueatcostdepreciatesovertime

Depreciation=systematicallocationoftheusefulnessofanasset
overitslife

E.g.Juicerboughtforbusinessatthebeginningof2013
Cost$200,wewilldepreciateit$50everyyear

Depreciationexpenseisaone
periodconsumptionofbenefits

Remember
Dr DepreciationExpense
CrAccumulatedDepreciation

(usefor4years,$0attheendof2016)

Acc Depn accountshowsall

depreciationchargedagainst
assettodate

Whatwouldthejournalentrybeeach year?
Dr Depn Expense
$50
CrAccumulatedDepn

Thecarryingvalueorbookvalueofanasset
=Initialcost accumulateddepreciation
49

$50

50

3 years
2.Chargingdepreciation 2015financialyear
Juicer atcost
Bal. b/d

200

Bal. c/d

2.

Usefullife
Residualvalue(saleorscrap) at the end of useful economic life
Patternofflowofbenefitsovertheusefullife.

Accum Depn 50

Accum Depn Juicer

Bal. c/d

150

Bal. b/d

LO4

Depreciationshouldbebasedontheassets

DepreciationExpense
200

Depreciation Calculation

100

Depn Exp 50

Bookvalueofthejuiceratendof2015=$200$150=$50

52

2.

Depreciation Usefullife

2.

LO4

Theperiodoftimeoverwhichanassetisexpectedtobe
availableforuse

LO4

Theestimatedamountthatanentitywouldobtainfrom
disposaloftheassetattheendofitsusefullife
Scrapvalue
fullydepreciated

Usefullifemaydifferfromphysicallifeoftheasset
becauseoftechnicalobsolescence
E.g.laptopcomputer

DepreciableAmount=AssetCost ResidualValue

physical and useful life may differ.

depreciation is over USEFUL life

E.g.Cost110,Scrapvalue10
Depreciableamount=100

53

54

2.FlowofBenefitsfromAsset

2.Straightlinedepreciation

LO4

3methodsofdepreciationbasedonwhenbenefitsoccur

LO4

Declineinvalueisexpectedtobeuniformacrossthelifeof
theasset

(1)Straightline(2)Reducingbalance(3)Unitsofproduction

Consistentuseorbenefitoverusefullife

Assumesbenefitsflowinequal amountsovertheusefullife
oftheasset

Straightline,e.g.Warehouse

Moreuse/benefitnowthanlater

samedepreciationexpenseeachyear.

Reducingbalance,e.g.Computer

Moreuse/benefitlaterthannoworinconsistentpattern

Depreciation
expenses

Unitsofproduction,e.g.Miningequipment,truck

55

Depreciation ResidualValue

56

Cost Residualvalue
Usefullife

2.Straightlinedepreciation example
Cost:
Usefullife:
Residualvalue:

2.ReducingBalanceDepreciation example

LO4

$40000
5years
$5000

Assumesbenefitsareusedmoreinearlieryears
UsesaDepreciationrate
Expenseisnotthesameeveryyear
DepreciationExpense=CarryingAmount Depreciationrate

Usingthestraightline depreciationmethod,
Calculatedepreciationexpensefortheyear

will leave you a balance at the end close to what you can sell it for
E.g.,InitialCostofPPE:
Depreciationrate: 25%

Depreciationexpense=(40000 5000)/5=$7000

$7000

57

$40000
Year1

Year2

Year3

Dep Exp

10 000

7500

5625

AccDep

10 000

17 500

23 125

Book ValueofPPE

30 000

22 500

16 875

Writethejournalentryfordepreciationinyear1
Dr Depn Expense$7000
CrAccumulatedDepn

LO4

58

2.UnitsofProductionDepreciationmethod

2.UnitsofProductionDepreciation example

LO4

Mostcommonactivitybasedmethodofapportioningcosts
Depreciationperunit= (Cost residualvalue)

CostofMotorVehicle:
$40000
ResidualValue:
$5000
Estimatednumberofkilometrestobedriven:200000
Depreciationperkm=($40000 5000)/200000=0.175

Estimatedtotal#ofunitsofprodn overlife

Theoreticallythemostcorrect
Problems?

IfinYear1,MotorVehicletravels20000km
Depreciationexpense=20000kmx$0.175=$3500
Depreciationexpense=20/200x$35000=$3500

Depreciateuntilkm=200,000
59

LO4

60

4219
27344
12656

3164
305

Example

A.
B.
C.
D.

PPE Mainpointsofinterest

LO3

1.
2.
3.
4.

On 1 January 2015, a new motor vehicle with a useful life of four years and an
estimated trade-in value of $12 000 was purchased by a business for $54 000.
The straight-line method is employed and the financial year ends on 31
December. What was the depreciation expense for year ended 31 December
2016?
$5250
$10 500
$13 500
$21 000

61

InitialcostofPPE
Depreciationofassets
Additionalexpenditureonassetsafteracquisition
Recordingthedisposalofassets

62

3.

AdditionalExpenditure

PPE Mainpointsofinterest

LO4

Shouldbeaddedtothecostoftheassetifthedefinition
andrecognitioncriteriaforassetsaremet

1.
2.
3.
4.

Otherwisetreatasanexpense

BettermentversusMaintenanceofPPE
Bettermentrelatestoincreaseinexpectedeconomic
benefits,e.g.productivity,efficiency,outputquality
Repairrelatestomaintainingexpectedeconomicbenefits

Basedonjudgement!
63

LO4

64

InitialcostofPPE
Depreciationofassets
Additionalexpenditureonassetsafteracquisition
Recordingthedisposalofassets

LO4

4.

DisposalofPPE

4.

LO4

PPEmaybe:
Scrapped:theassetisworthlessandhasnoresale/residualvalue

DisposalofPPE

LO4

Recorddepreciationupuntilthedateofdisposal
Recordgainorlossfromthesaleoftheasset

Sold

Removethenoncurrentassetfromthecompanysbooks
Exchangedforanotherasset(tradein)

Important
* Profit on sale arises if sales price is greater than NBV
* Loss on sale arises if sales price is less than NBV

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4.DisposalofaMachine Example

4. DisposalofaMachine Example

LO4

Asof30June2015
Originalcost
=$50,000
Accumulateddepreciation
=$24,000
Bookvalue
=$26,000
Straightlinedepreciation
=$12,000peryear
Soldon1August2015for$21,000cash
one month
Preparethenecessaryjournalentries

Recorddepreciationupuntilthedateofdisposal
DrDepreciationExpense
$1000
CrAccumulatedDepreciation
$1000

Calculategainorlossfromthesaleoftheasset
On1August,Bookvalueofmachine =$25000
Receivedcashinexchangefor$21,000
GainorLoss?

insert T tables..
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LO4

Example DisposalofaMachine(cont.)

Nextlecture:

LO4

Removethenoncurrentassetfromthecompanysbooks
On1August
Machine

50 000

DR

Accumulated Depreciation

25 000

CR

25 000

DR

Week9
FinancialReportingPrinciples,AccountingStandards
andAuditing

DrCash21000
DrAccumulateddepn 25000
DrLossonsale4000
CrMachine(cost)50000

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