02. Plant Assets, Natural Resources and Intangible Assets (II).pptx

Capaian Pembelajaran
Mata Kuliah
1. Mahasiswa mengetahui jenis-jenis penarikan aktiva tetap
serta melakukan jurnal pencatatannya.
2. Mahasiswa mampu mengetahui kategori Natural
Resources dan melakukan penghitugan penyusutannya.
3. Mahasiswa mampu mengetahui kategori Intangible Assets
seperti : Paten, Hak Cipta (copyright), Trademark,
Franchise dan Goodwill, mengetahui perbedaan atas
masing-masing intangible assets tersebut, serta jurnal
pencatatan terkait.
4. Mahasiswa mampu menyajikan beban
penyusutan/amortisasi dalam Laporan Keuangan Laba
Rugi, serta menyajikan Aktiva Tetap dan Aktiva Tidak Tetap
dalam Laporan Posisi Keuangan.
This Photo by Unknown Author is licensed under CC BY-SA-NC

1. Methods of Plant Asset Disposal
1. Retirement of Plant Asset
2. Selling of Plant Assets
3. Exchanging of Plant Asset

1. Methods of Plant Asset Disposal • When disposing of a plant asset, a
company removes from the accounts
all amounts related to the asset. This
includes the original cost and the
total depreciation to date in the
accumulated depreciation account.
• Whatever the disposal method, the
company must determine the book
value of the plant asset at the
disposal date to determine the gain
or loss.
• Recall that the book value is the
difference between the cost of the
plant asset and the accumulated
depreciation to date.

1. A. Disposal of Plant Assets -
Retirement
Equipment acquired at a cost of $25,000 is fully depreciation at
December 31, 2018. On February 14, 2019, the equipment is retired.

Retirement
Equipment costing $6,000, with no residual value, is depreciated at
an annual straight-line rate of 10%. After the December 31, 2018,
adjusting entry, Accumulated Depreciation—Equipment has a
$4,650 balance. On March 24, 2019, the asset is removed from
service and discarded.
$600 × 3/12

Retirement
The discarding of the equipment is then recorded as shown below.
(Note that this is the second of two entries on March 24.)

Retirement
To illustrate the retirement of plant assets, assume that Hobart
Company retires its computer printers, which cost $32,000. The
accumulated depreciation on these printers is $32,000. The
equipment, therefore, is fully depreciated (zero book value). The
entry to record this retirement is as follows:

1. B. Disposal of Plant Assets - Selling Plant Assets
In a disposal by sale, the company compares the
book value of the asset with the proceeds received
from the sale. If the proceeds of the sale exceed the
book value of the plant asset, a gain on disposal
occurs. If the proceeds of the sale are less than the
book value of the plant asset sold, a loss on disposal
occurs.

Equipment was purchased at a cost of $10,000. It had no estimated residual
value and was depreciated at a straight-line rate of 10%. The equipment is sold
for cash on October 12 of the eight year of its use. The balance of the
accumulated depreciation account as of the preceding December 31 is $7,000.
The entry to update the depreciation for the nine months of the current year
is as follows:
So, the total book value as per September 30 is $ 7,750 ($ 7,000 + $ 750)

After the current depreciation is recorded, the book value of the asset is
$2,250 ($10,000 – $7,750).

(Loss on Sale)
$2,250 ($10,000 – $7,750).

(Gain on Sale)
$2,250 ($10,000 – $7,750).

1. C. Disposal of Fixed Assets - Exchanging Asset
1. With Commercial Substance
2. Without Commercial Substance
Commercial Substance is defined
as event or transaction causing the
cash flow of entity to change. That
is, if the exected cash flows after the
exchange differ from what would
have been expected without this
occurring, the exchange has
commercial substance and is to be
accounted for at fair value

• Gain and losses arising from
exchanging asset with
commercial substance
recognized as a component of
profit and loss on the
transaction period.
• Losses arising from exchanging
asset without commercial
substance recognized on the
transaction period.

(Gain on Exchange)

(Loss on Exchange)
This time assume that only a $675 trade-in allowance was allowed toward the purchase of the new
equipment. Because the market value of the new equipment is $5,000, the cash paid on the
exchange is $4,325.

02. Natural Resources
Natural resources consist of standing timber and underground deposits of oil, gas, and minerals.
These long-lived productive assets have two distinguishing characteristics: (1) they are physically
extracted in operations (such as mining, cutting, or pumping), and (2) they are replaceable only
by an act of nature.
The acquisition cost of a natural resource is the price needed to acquire the resource and
prepare it for its intended use. For an already-discovered resource, such as an existing coal mine,
cost is the price paid for the property.

02. Depletion of Natural Resources
The allocation of the cost of natural resources in a rational and systematic manner over the
resource’s useful life is called depletion. (That is, depletion is to natural resources as
depreciation is to plant assets.) Companies generally use the units-of-activity method (learned
earlier in the chapter) to compute depletion.
Under the units-of-activity method, companies divide the total cost of the natural resource
minus salvage value by the number of units estimated to be in the resource. The result is a
depletion cost per unit. Tocompute depletion, the cost per unit is then multiplied by the
number of units extracted.

02. Depletion of Natural Resources
To illustrate, assume that Lane Coal Company invests $5 million in a mine estimated to have 1 million tons
of coal and no salvage value.
If Lane extracts 250,000 tons in the first year, then the depletion for the year is $1,250,000 (250,000 tons × $5). It records
the depletion as follows.

03. Intangible Assets
Intangible assets are rights, privileges, and
competitive advantages that result from
the ownership of long-lived assets that do
not possess physical substance.
Evidence of intangibles may exist in the
form of contracts or licenses. Intangibles
may arise from the following sources:
1. Government grants, such as patents,
copyrights, licenses, trademarks, and
trade names.
2. Acquisition of another business, in
which the purchase price includes a
payment for goodwill.
3. Private monopolistic arrangements
arising from contractual agreements,
such as franchises and leases.

03. Intangible Assets
Companies record intangible assets at
cost. Intangibles are categorized as
having either a limited life or an
indefinite life.
If an intangible has a limited life, the
company allocates its cost over the
asset’s useful life using a process
similar to depreciation. The process of
allocating the cost of intangibles is
referred to as amortization. The cost of
intangible assets with indefinite lives
should not be amortized.
Intangible assets are typically amortized on
a straight-line basis

A. Patents
• The exclusive right granted by the federal
government to produce and sell goods with one or
more unique features is called a patent. These rights
continue in effect for 20 years.
• A patent is nonrenewable. But, companies can
extend the legal life of a patent by obtaining new
patents for improvements or other changes in the
basic design. The initial cost of a patent is the cash
or cash equivalent price paid to acquire the patent.
• Because a patent (as well as other intangible assets)
does not exist physically, it is acceptable to credit
the asset. This approach is different from physical
fixed assets, which require the use of a contra asset
account.

A. Patents
• At the beginning of its fiscal year, a business acquires
patent rights for $100,000. The patent’s remaining
useful life is estimated at 5 years. The entry to
amortize the patent at the end of the year is as
follows:

B. Copyrights
• The exclusive right granted by the
federal government to publish and sell a
literary, artistic, or musical composition
is called a copyright. A copyright
extends for 70 years beyond the
author’s death.
• The cost of a copyright is the cost of
acquiring and defending it.

C. Trademarks • A trademark or trade name is a word, phrase,
jingle, or symbol that identifies a particular
enterprise or product. Trade names like Wheaties,
Monopoly, Big Mac, Kleenex, Coca-Cola, and Jeep
create immediate product identification. They also
generally enhance the sale of the product.
• The creator or original user may obtain exclusive
legal right to the trademark or trade name by
registering it with the government. Such registration
provides 20 years of protection. The registration
may be renewed indefinitely as long as the
trademark or trade name is in use.
• If a company purchases the trademark or trade
name, its cost is the purchase price.
• If a company develops and maintains the trademark
or trade name, any costs related to these activities
are expensed as incurred. Because trademarks and
trade names have indefinite lives, they are not
amortized.

D. Franchise
• A franchise is a contractual arrangement between a
franchisor and a franchisee. The franchisor grants
the franchisee the right to sell certain products,
perform specific services, or use certain trademarks
or trade names, usually within a designated
geographic area.
• When a company can identify costs with the
purchase of a franchise or license, it should
recognize an intangible asset. Companies should
amortize the cost of a limited-life franchise (or
license) over its useful life. If the life is indefinite,
the cost is not amortized. Annual payments made
under a franchise agreement are recorded as
operating expenses in the period in which they are
incurred.

E. Goodwill
• Usually, the largest intangible asset that appears on a
company’s balance sheet is goodwill. Goodwill
represents the value of all favorable attributes that
relate to a company that are not attributable to any
other specific asset. These include exceptional
management, desirable location, good customer
relations, skilled employees, high-quality products, and
harmonious relations with labor unions. Goodwill is
unique. Unlike assets such as investments and plant
assets, which can be sold individually in the
marketplace, goodwill can be identified only with the
business as a whole.
• Companies record goodwill only when an entire
business is purchased. In that case, goodwill is the
excess of cost over the fair value of the net assets
(assets less liabilities) acquired.
• In recording the purchase of a business, the company
debits (increases) the identifiable acquired assets,
credits liabilities at their fair values, credits cash for the
purchase price, and records the difference as goodwill.
Goodwill is not amortized because it is considered to
have an indefinite life.

E. Goodwill
• However, goodwill must be written down if a company
determines that its value has been permanently
impaired. Companies report goodwill in the balance
sheet under intangible assets.
• A loss should be recorded if the business prospects of an
acquired firm (and the acquired goodwill) become
significantly impaired. Assume that on December 31,
Face Card Company has determined that $250,000 of the
goodwill created from the purchase of Electronic Systems
is impaired.

Intangible Asset Disclosure

Comparison of Intangible Assets

Fixed and Intangible Assets

Fixed and Intangible Assets
• Intangible assets are usually reported in
the balance sheet in a separate section
following fixed assets.
• The balance of each class of intangible
assets should be disclosed net of any
amortization.
• The cost and related accumulated
depletion of mineral rights are normally
shown as part of the Fixed Assets section
of the balance sheet.

02. Plant Assets, Natural Resources and Intangible Assets (II).pptx

Recommended

Recommended

More Related Content

Similar to 02. Plant Assets, Natural Resources and Intangible Assets (II).pptx

Similar to 02. Plant Assets, Natural Resources and Intangible Assets (II).pptx (20)

Recently uploaded

Recently uploaded (20)

02. Plant Assets, Natural Resources and Intangible Assets (II).pptx