Financial Accounting
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1) What are the differences among valuation, depreciation, amortization, and depletion? Is it appropriate to calculate depreciation using two different methods? Why or why not? Which depreciation method gives you the highest depreciation expense in the first year? Why?
2) Why would you use the percentage of sales method of calculating doubtful accounts as opposed to the percentage of receivables method? Is it appropriate to use a hybrid of the percentage of sales and the percentage of receivables methods of calculating the allowance for doubtful accounts? Why or why not? Does GAAP allow for the use of both methods at the same time? Why or Why not?
3) What is the purpose of subsidiary ledgers? What are the possible ramifications of not using subsidiary ledgers? How are subsidiary ledgers used in journalizing entries?
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1) What are the differences among valuation, depreciation, amortization, and depletion? Is it appropriate to calculate depreciation using two different methods? Why or why not? Which depreciation method gives you the highest depreciation expense in the first year? Why?
The difference among valuation, depreciation, amortization, and depletion is the types of assets that they apply. The valuation is the appropriate procedures to determine the balance of inventory. The depreciation is used for fixed assets while depletion is used for wasting assets or natural resources. The amortization is used for intangible assets such as goodwill and any premium over par value paid in the purchase of preferred stock or bond investments. It is inappropriate to calculate depreciation using two different methods because
It is not appropriate to calculate depreciation using two different methods ...
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