COMMERCE 1AA3 Lecture Notes - Lecture 25: 6 Years, Intellectual Property

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Emad Mohammad

Document Summary

Chapter 6: on january 1, 2001 abc purchased a truck for ,000 with an estimated useful life of. December 15, 2004, abc revised its estimate of useful life to 8 years and of salvage value to ,000. Abc uses straight line method to amortize the truck. The book value of the asset as of the beginning of the accounting period i(cid:374) which the esti(cid:373)ates cha(cid:374)ge (does(cid:374)"t (cid:373)atter what da(cid:455) the estimate changes) Annual depreciation expense = (40,000 10,000)/6 years = 5,000. Ad as of 1/1/2004 = 5,000 x 3 = 15,000. Depreciation expense for 2004 = (bv as of 1/1/04 new sv / remaining useful life. Depreciation expense = (25,000 5,000) / 5 = 4,000. Impairment- significant and permeant drop in value of asset. Xyz inc. sold the following machine in 2005: Gain (loss) on sale of asset = sales price bv. Annual depreciation expense = (84,000 4,000)/8 = 10,000. Gain (loss) = 37,000 44,000 = (7,000)