Depreciation The decrease in the value of long term tangible assets due to its use is known as depreciation. It is the allocation of the cost of long term tangible assets over the useful life of the asset. Intangibles assets The assets that are not physical in nature, and add value to the business in the future are referred to as intangible assets. For example, goodwill , patents, copyrights. Impairment Loss It is the difference between the current book value of the long term asset and the fair market value of the asset as on the impairment. To compute : The Book Value (B V) of the Plant and Equipment (P & E) and Patent at the end of 2018.
Depreciation The decrease in the value of long term tangible assets due to its use is known as depreciation. It is the allocation of the cost of long term tangible assets over the useful life of the asset. Intangibles assets The assets that are not physical in nature, and add value to the business in the future are referred to as intangible assets. For example, goodwill , patents, copyrights. Impairment Loss It is the difference between the current book value of the long term asset and the fair market value of the asset as on the impairment. To compute : The Book Value (B V) of the Plant and Equipment (P & E) and Patent at the end of 2018.
Solution Summary: The author explains the straight-line method used to calculate depreciation and amortization on plant and equipment and patents.
The decrease in the value of long term tangible assets due to its use is known as depreciation. It is the allocation of the cost of long term tangible assets over the useful life of the asset.
Intangibles assets
The assets that are not physical in nature, and add value to the business in the future are referred to as intangible assets. For example, goodwill, patents, copyrights.
Impairment Loss
It is the difference between the current book value of the long term asset and the fair market value of the asset as on the impairment.
To compute: The Book Value (B V) of the Plant and Equipment (P & E) and Patent at the end of 2018.
(2)
To determine
To explain: when should the plant and equipment and the patent be tested for impairment.
(3)
To determine
To explain: When should goodwill should be tested for impairment.
(4)
To determine
The amount of any impairment loss to be recorded, if any, for the three assets.
Suppose you take out a five-year car loan for $14000, paying an annual interest rate of 4%. You make
monthly payments of $258 for this loan.
Complete the table below as you pay off the loan.
Months
Amount still owed
4% Interest on
amount still owed
(Remember to divide
by 12 for monthly
interest)
Amount of monthly
payment that goes
toward paying off the
loan (after paying
interest)
0
14000
1
2
3
+
LO
5
6
7
8
9
10
10
11
12
What is the total amount paid in interest over this first year of the loan?
Suppose you take out a five-year car loan
for $12000, paying an annual interest rate
of 3%. You make monthly payments of $216
for this loan.
mocars
Getting started (month 0): Here is how the process works. When you buy the car, right at month 0, you owe
the full $12000. Applying the 3% interest to this (3% is "3 per $100" or "0.03 per $1"), you would owe
0.03*$12000 = $360 for the year. Since this is a monthly loan, we divide this by 12 to find the interest
payment of $30 for the month. You pay $216 for the month, so $30 of your payment goes toward interest
(and is never seen again...), and (216-30) = $186 pays down your loan.
(Month 1): You just paid down $186 off your loan, so you now owe $11814 for the car. Using a similar
process, you would owe 0.03* $11814 = $354.42 for the year, so (dividing by 12), you owe $29.54 in interest
for the month. This means that of your $216 monthly payment, $29.54 goes toward interest and $186.46
pays down your loan.
The values from above are included…
Suppose you have an investment account that earns an annual 9% interest rate, compounded monthly. It
took $500 to open the account, so your opening balance is $500. You choose to make fixed monthly
payments of $230 to the account each month.
Complete the table below to track your savings growth.
Months
Amount in account (Principal)
9% Interest
gained
(Remember to
divide by 12 for
monthly interest)
Monthly Payment
1
2
3
$500
$230
$230
$230
$230
+
$230
$230
10
6
$230
$230
8
9
$230
$230
10
$230
11
$230
12
What is the total amount gained in interest over this first year of this investment plan?