Week 11 — Long-Lived Assets

Why this matters

Whether you run a coffee roaster with a new roasting machine, keep the books for a software firm that buys a patent, or manage a repair shop's delivery van, an asset's cost and its share of each year shape the profit and the balance sheet.

In plain language

Some things a business buys are used up in a month, and some are used for years. This week you learn to record the second kind, the long-lived assets (things a business keeps and uses for more than a year, such as a van or a machine). You will find what an asset really cost and then spread that cost over the years that use it, which is called depreciation (moving part of an asset's cost into expense each year). You will compare three ways of doing that spreading and record what happens when the business sells the asset. By the end, you can explain why a van's book value is not its price on a used-car lot.

• Already covered: Week 4's depreciation and Week 5's balance sheet.
• This week: asset cost, three depreciation methods, and disposal.
• How they connect: each year's depreciation is a Week 4 adjusting entry.
• Where we're going next: Week 12, Current Liabilities and Payroll.

Focus

What did an asset cost, and how much of that cost belongs to each year the business uses it?

By the end of this module, you should be able to:

• [ ] measure an asset's cost, freight and setup included
• [ ] compute three depreciation methods and their schedules
• [ ] compare the methods by their effects, without ranking them
• [ ] record a sale with its gain or loss

To-do

Plan your week

1. Read Chapter 11 (~40–50 minutes), then the lecture and slides.
2. Work the lecture tutorial (60–90 minutes).
3. Do the practice set (15–25 minutes).
4. Do the Accounting Workshop (about 90 minutes), the discussion, and the assignment.
5. Take the quiz.

This week's checkpoint: depreciate the van by straight-line and double-declining-balance, and find the loss on its sale.

You've got this

Take it in order, and ask your instructor if a step snags.

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