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MODULE 6
Asset Recognition
and Operating Assets
Given a
gross balance of $100,000 and
estimated uncollectible accounts of $2,900,
accounts receivable will be reported as follows:
$230
84 days
Average Collection period = $1,000
365
Sales revenue
- COGS
Gross profit
©Cambridge Business Publishers, 2015 19
The Cost of Goods Sold Computation
To illustrate,
assume that a company has inventory on its balance
sheet at a cost of $27,000.
Management learns that the inventory’s
replacement cost is $23,000 and writes inventories
down to a balance of $23,000.
The following financial statement effects template
shows the adjustment.
Depreciation Methods:
1. Straight-line method
2. Accelerated Methods (Double-declining-balance
method)
INSIGHT:
All depreciation methods leave the same salvage value.
Total depreciation over asset life is identical for all
methods.
©Cambridge Business Publishers, 2015 47
Asset Sales
Percent used up =