Chapter 9 - Long-Lived Tangible and Intangible Assets

Intangible Assets

Limited Life: patents and copyrights
Unlimited Life and isn’t amortized: trademarks and goodwill

Acquisition costs of tangible assets - land

Purc hase, legal, survey, title search

Acquisition costs of tangible assets - buildings

purchase/construction, legal, appraisal, architect

Acquisition costs of tangible assets - Equipment

purchase/construction, sales, transportation, installation

Expenditure: Ordinary repairs and maintenance

Small, recurring, maintain normal operating conditions. Doesn’t directly increase produciivity or extend useful life. Expense in the period incurred.

Expenditure: Extraordinary repairs, replacements, additions

Large, infrequent, major overhauls or replacements of major components. Extends useful life, increase productivity or efficiency. Capitalize by adding to asset account

Book Value =

Acquisition cost - accumulated depreciation (unused)

Method of depreciation: straight line

Cost - residual vale/ useful life = depreciation expense

Depreciable cost/depreciation rate = depreciation expense

Method of depreciation: Units of Production

(Cost - residual value) X (actual production this period / Estimated total production) = depreciation expense
Depreciable Cost X Depreciable Rate = Depreciation Expense

Method of Depreciation: Double Declining Balance Method

(Cost - accumulated depreciation) X (2/Useful life) = depreciation expense

Book value at beginning of period X Depreciation Rate = Depreciation Expense

Intangible Assets

If purchases, record at price and gees as a noncurrent asset on the balance sheet.

if internally developed, record as incurred expenses on the income statement.

If intangible has limited life:

Amortize over short economic life and use straight line method

If intangible has unlimited life

Don’t amortize

What method of depreciation is used if assets have more use in the beginning of their life than the end?

Double Declining Balance