Concept introduction:
Depletion:
When natural resources such as coal, iron ore, oil reserves and mineral etc. are extracted from the earth the company records the cost of extraction to the particular unit of the natural resource that is being extracted and the process of allocating cost according to the usage of natural resource during a specific period is called as depletion.
Fixed assets play a major in the contribution of revenue to the company and they are significant for the efficient and continuous operation of the day to the day business. Depreciation is the process in which the cost of the fixed assets other than land is allocated to expense over the useful life of the asset.
Amortization:
Amortization is same as depreciation but it is used for intangible assets like patents, franchise,
Balance Sheet:
It is a
Determine the balance sheet classification and cost allocation process for each item.
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Cornerstones of Financial Accounting
- When writing journal entries for recording assets, what is the end result in the account: Group of answer choices Aggregate cost of the asset Cost, net of preparation costs. Proceeds paid to employees Only the net depreciable costsarrow_forwardProperty, Plant, and Equipment (PPE) Assessment: Describe the company’s Property, Plant and Equipment section in the balance sheet relative to the total fixed assets of the company’s industry (use quantitative and qualitative summaries to support your description. Analyze the accounting treatment of Property, Plant and Equipment, including depreciation methods employed and any impairments recognized, and include a brief summary of the accounting standards and principles included in the decision (reference the Notes that inform your summary). Discuss the significance of Property, Plant And Equipment in the company’s operations and its impact on financial performance and reporting.arrow_forwardState and classify the items as per Theory of constraints: 1.Depreciation of a machinery 2.Rental utilities 3.R & D costs 4.Equipment & buildings-costs 5.Raw materials in stock 6.Sales of the product 7.Inventory-Finished goodsarrow_forward
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- A manufacturing company reports cost of goods manufactured as a(n) current asset on the balance sheet. component of the raw materials inventory on the balance sheet. administrative expense on the income statement. component in the calculation of cost of goods sold on the income statementarrow_forwardCurrent year’s depreciation charge relating to Equipment used for designing products should be included as an expense in the current year’s Statement of Comprehensive Income, within which of the headings stated below: Within other operating expenses, Within Distribution cost or Within Administrative expenses or Within Cost of sales.arrow_forwardDescribe the flow of costs through a product costing system for inventory valuation purposes (i.e., excluding non-manufacturing overhead costs). Address the following in your answer:Classification of product costs as an asset and then as an expense. o Make reference to the definition of an asset in the 2018 New Zealand Conceptual Framework oDescribe assets and expenses from a management accounting perspective.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning