Slide

9-1

PLANT AND
INTANGIBLE ASSETS
Chapter No 9

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Slide
9-2

Plant Assets
Long-lived
Long-lived assets
assets acquired
acquired for
for use
use in
in
business
business operations.
operations.
Similar to long-term prepaid expenses

As years pass, and the

The cost of plant assets services are used, the
is the advance purchase cost is transferred to
of services. depreciation expense.
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Slide
9-3

Major Categories of Plant Assets

T a n g ib le P la n t I n t a n g i b le N a tu ra l
A s s e ts A s s e ts R e s o u rc e s

L o n g -te rm N o n c u r r e n t a s s e ts S it e s a c q u ir e d f o r
a s s e t s h a v in g w it h n o p h y s ic a l e x t r a c t in g v a l u a b le
p h y s ic a l s u b s t a n c e . s u b s ta n c e . re s o u rc e s .

L a n d , b u i l d in g s , P a t e n t s , c o p y rig h t s , O il r e s e r v e s ,
e q u ip m e n t, tra d e m a rk s , t im b e r , o t h e r
f u r n it u r e , f i x t u r e s . f r a n c h is e s , g o o d w i l l. m in e r a ls .
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Slide
9-4

Accountable Events
1.
1. Acquisition.
Acquisition.
2.
2. Allocation
Allocation of
of the
the
acquisition
acquisition cost
cost
to
to expense
expense over
over
the
the asset’s
asset’s useful
useful
life
life
(depreciation).
(depreciation).
3.
3. Sale
Sale or
or disposal.
disposal.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002

Slide
9-5

Acquisition of Plant Assets

Asset
Asset
price
price
Cost
Cost +
Reasonable
Reasonableand
and
necessary
necessarycosts
costs.. ....

......for
forgetting
getting ......for
forgetting
getting
the
theasset
assetto
tothe
the the
theasset
assetready
ready
desired
desiredlocation.
location. for
foruse.
use.
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Slide
9-6

Determining Cost
On
On May
May 4,4, Heat
Heat Co.,
Co., an
an Ohio
Ohio maker
maker ofof stoves,
stoves,
buys
buys aa new
new machine
machine from from aa Texas
Texas company.
company.
The
The new
new machine
machine hashas aa price
price of
of $52,000.
$52,000. Sales
Sales
tax
tax was
was computed
computed at at 8%.
8%.
Heat
Heat Co.
Co. pays
pays $500
$500 shipping
shipping cost
cost to
to get
get the
the
machine
machine to to Ohio.
Ohio. After
After the
the machine
machine arrives,
arrives,
set-up
set-up costs
costs ofof $1,300
$1,300 areare incurred,
incurred, along
along with
with
$4,000
$4,000 inin testing
testing costs.
costs.

Compute
Compute the
the cost
cost of
of Heat
Heat Co.’s
Co.’s new
new machine.
machine.
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Slide
9-7

Determining Cost

Prepare the journal entry.

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Slide
9-8

Special Considerations
Cost
Cost includes
includesreal
realestate
estate
commissions,
commissions,escrow
escrow
Land
Land fees,
fees,legal
legalfees,
fees,clearing
clearing
and
andgrading
gradingthe
theproperty.
property.

Improvements
Improvementstotoland
land
Land
Land such
suchasasdriveways,
driveways,
Improvements fences,
fences, and
andlandscaping
landscaping
Improvements are
arerecorded
recordedseparately.
separately.
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Slide
9-9

Special Considerations
Repairs
Repairsmade
madeprior
prior to
tothe
the
building
building being
beingput
put in
in use
use
Buildings
Buildings are
areconsidered
consideredpart
part of
ofthe
the
building’s
building’scost.
cost.

Related
Relatedinterest,
interest,insurance,
insurance,
and
andproperty
propertytaxes
taxesare
are
Equipment
Equipment treated
treatedas
asexpenses
expensesof ofthe
the
current
currentperiod.
period.
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Slide
9-10

Special Considerations

Allocation
Allocation of
of aa Lump-Sum
Lump-Sum Purchase
Purchase

The
Thetotal
totalcost
cost The
Theallocation
allocation
must
mustbebe is
isbased
basedon on
allocated
allocatedto to the
the relative
relative
I think I’ll buy the separate
separate Fair
FairMarket
Market
accounts
accountsfor Value
whole thing; barn, for Valueofofeach
each
land, and animals. each
eachasset.
asset. asset
asset
purchased.
purchased.

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Slide
9-11

Capital Expenditures and Revenue

Expenditures
Capital
Capital Revenue
Revenue
Expenditure
Expenditure Expenditure
Expenditure

Any
Anymaterial
materialexpenditure
expenditure Expenditure
Expenditurefor
for
that
thatwill
willbenefit
benefit several
several ordinary
ordinaryrepairs
repairs
accounting
accountingperiods.
periods. and
and maintenance.
maintenance.

To
To capitalize
capitalize an
anexpenditure
expenditure To
Toexpense
expensean
anexpenditure
expenditure
means
meansto tocharge
chargeitit to
toan
an means
meansto
tocharge
chargeititto
toan
an
asset
assetaccount.
account. expense
expenseaccount.
account.
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Slide
9-12

Depreciation
The
The allocation
allocation of
of the
thecost
costof
ofaa plant
plantasset
asset to
toexpense
expensein
inthe
the
periods
periodsininwhich
whichservices
servicesare
arereceived
receivedfrom
fromthe
theasset.
asset.

Balance
BalanceSheet
Sheet
Cost of Assets:
Assets:
plant Plant
Plantand
and
assets equipment
equipment

as the services
Income
IncomeStatement
Statement are received
Revenues:
Revenues:
Expenses:
Expenses:
Depreciation
Depreciation
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Slide
9-13

Depreciation
Book
Book Value
Value
––Cost
Cost –– Accumulated
Accumulated Depreciation
Depreciation
Accumulated
Accumulated Depreciation
Depreciation
––Contra-asset
Contra-asset
––Represents
Represents thethe portion
portion of
of an
an
asset’s
asset’s cost
cost that
that has
has already
already
been
been allocated
allocated toto expense.
expense.
Causes
Causes ofof Depreciation
Depreciation
––Physical
Physical deterioration
deterioration
––Obsolescence
Obsolescence

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Slide
9-14

Methods of depreciation
1. Straight line Method
2. Double Declining Method
3. Sum of the Year Digit Method
4. MACRS
5. Units of Output Method
6. Mileage Method
7. Production Hours Method

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Slide
9-15

Straight-Line Depreciation

Depreciation Cost - Residual Value

=
Expense per Year Years of Useful Life

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Slide
9-16

Straight-Line Depreciation
On
OnJanuary
January1,1, 2003,
2003, Bass
BassCo.Co.buys
buysaanewnew boat.
boat. Bass
Bass
Co.
Co.pays
pays$24,000
$24,000for
forthe
theboat.
boat.The
Theboat
boat has
hasanan
estimated
estimated residual
residualvalue
valueof of $3,000
$3,000and
andanan estimated
estimated
useful
useful life
life of
of55years.
years.
Compute
Compute depreciation
depreciation for
for 2003
2003 using
using the
the
straight-line
straight-line method.
method.

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Slide
9-17

Straight-Line Depreciation
Bass
BassCo.
Co. will
willrecord
record$4,200
$4,200 depreciation
depreciation each
each year
yearfor
for
five
fiveyears.
years. Total
Totaldepreciation
depreciationover
overthe
theestimated
estimateduseful
useful
life
lifeof
of the
theboat
boat is:
is:

Salvage Value
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Slide
9-18

Depreciation for Fractional Periods

When
Whenananasset
asset isisacquired
acquiredduring
duringthe
theyear,
year,
depreciation
depreciationin
in the
theyear
yearof
ofacquisition
acquisition must
must be
be
prorated.
prorated.

½
Half-Year
Half-Year Convention
Convention
In
In the
the year
year of
of
acquisition,
acquisition, record
record six
six
months
months of of depreciation.
depreciation.

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Slide
9-19

Half-Year Convention
Using the half-year convention, calculate the
straight-line depreciation on December 31,
2003, for equipment purchased in 2003. The
equipment cost $75,000, has a useful life of 10
years and an estimated salvage value of
$5,000.

Depreciation
Depreciation == ($75,000
($75,000 -- $5,000)
$5,000) ÷÷ 1010
== $7,000
$7,000 for
for aa full
full year
year
Depreciation
Depreciation == $7,000
$7,000 ×× // == $3,500
11
22 $3,500
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Slide
9-20

Declining-Balance Method
Depreciation
Depreciation in
inthe
theearly
earlyyears
years of
of an
an asset’s
asset’sestimated
estimated
useful
useful life
lifeis
is higher
higher than
thanin
inlater
lateryears.``
years.``

The
Thedouble-declining
double-decliningbalance
balancedepreciation
depreciation
rate
rateis
is200%
200%ofofthe
thestraight-line
straight-line
depreciation
depreciationrate
rateof
of1/Useful
1/UsefulLife.
Life.
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Slide
9-21

Declining-Balance Method
On
OnJanuary
January1,1, 2003,
2003, Bass
BassCo.Co.buys
buysaanewnew boat.
boat. Bass
Bass
Co.
Co.pays
pays$24,000
$24,000for
forthe
theboat.
boat.The
Theboat
boat has
hasanan
estimated
estimated residual
residualvalue
valueof of $3,000
$3,000and
andanan estimated
estimated
useful
useful life
life of
of55years.
years.
Compute
Compute depreciation
depreciation for
for 2003
2003 using
using the
the
double-declining
double-declining balance
balance method.
method.

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Slide
9-22

Declining-Balance Method
Compute
Total
Compute depreciation
Total depreciation over
over the
depreciation
depreciation for
for the
theestimated
estimated the rest
useful of
restlife
useful the
ofof
life an
the
of an
asset
asset is
isthe
the same
same using
using either
either the
the straight-line
straight-line method
method or
or
boat’s
boat’s
the
estimated
estimated usefuluseful life.
life.
the declining-balance
declining-balance method.
method.

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Slide
9-23

Sum of the Year Digit Method

• Annual depreciation =(cost – salvage value) *
(life/year digit)
• YEAR DIGIT = N(N+1) / 2
• WHERE N = LIFE

• EXAMPLE = 5 YEARS
• YEAR DIGIT = 5*6 /2 = 15
OR
• YEAR DIGIT = 1+2+3+4+5 = 15
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Slide
9-24

The Units-of-Output Method

Cost per Unit Cost - Residual Value

=
of Output Estimated Units of Output

Depreciation Cost per Unit Number of

Expense
= ×
of Output Units Produced

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Slide
9-25

PRODUCTION HOURS METHOD

• USED FOR MACHINES
• Under machine hour rate method of
depreciation, total number of working hours of a
machine during the whole of its effective life is
estimated, and then the cost of machine is
divided by this estimated total number of
working hours in order to arrive at the hourly
rate which is multiplied by the number of hours
the machine has been worked during the year to
find out amount of depreciation for the period.

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Slide
9-26

MILEAGE METHOD
• USED FOR VEHICLES
• This method is used only for those assets whose useful
life depends upon the fact that how many kilometers
they have been driven e.g. buses, cars, trucks, etc.
• The depreciation on such assets depends on as to how
many kilometers these assets have been driven.
• For example, a car costing $12,000 was purchased and
useful life was estimated to be 48,000 kms.
• Its rate of depreciation would be 25 cents per
kilometer.
• If during first year it was driven 10,000 kilometers, the
amount of depreciation would be 10,000 × $0.25 =
2,500.
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Slide
9-27

EXAMPLE
• The American company purchased a wheel loader
for $160,000 on January 1, 2015. The information
regarding usability and life of the loader is given
below:
• Estimated salvage value$10,000
• Estimated useful life10 years
• Estimated productive life in hours15,000 hours
• The wheel loader was used for 2,000 hours
during the year 2015.
• Required: Calculate depreciation expense for the
year 2015 using activity method of depreciation.
(HOURS OR UNITS)
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Slide
9-28

SOLUTION
Depreciation expenses = [($160,000 –
$10,000)/15,000] × 2,000 = $20,000
• The company will record a depreciation
expenses of $20,000 for the year 2015.
• The wheel loader will be fully depreciated
after completing 15,000 hours of work – that
is its productive life.

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Slide
9-29

MACRS: The “Tax Method”

MACRS == M
MACRS odified A
Modified ccelerated C
Accelerated ost R
Cost ecovery S
Recovery System
ystem

The
Theonly
onlyaccelerated
accelerated method
method
Based
Based on
on allowed
allowedbybythe
theIRS
IRSwhen
when
Declining-Balance
Declining-Balance computing
computingdepreciation
depreciationfor
fortax
tax
Methods
Methods return
returnpurposes.
purposes.

Asset
AssetCost
Cost ×× MACRS
MACRSraterate
Rates
Ratesare
areavailable
availablefrom
fromtables
tables
provided
providedbybythe
theIRS.
IRS.
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Slide
9-30

Financial Statement Disclosures

•• Estimates
Estimates of
of Useful
Useful Life
Life and
and
Residual
Residual Value
Value
–– May
Maydiffer
differfrom
fromcompany
companyto to
company.
company.
–– The
Thereasonableness
reasonablenessof of
management’s
management’sestimates
estimatesis
is
evaluated
evaluatedbybyexternal
externalauditors.
auditors.
•• Principle
Principle of
of Consistency
Consistency
–– Companies
Companiesshould
shouldavoid
avoidswitching
switching
depreciation
depreciationmethods
methodsfrom
fromperiod
periodto
to
period.
period.

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Slide
9-31

Revising Depreciation Rates

Predicted
Predicted Predicted
Predicted
salvage
salvagevalue
value useful
usefullife
life

So
So depreciation
depreciation
is
is an
an estimate.
estimate.

Over
Over the
the life
life of
of an
an asset,
asset, new
new information
information
may
may come
come to to light
light that
that indicates
indicates the
the
original
original estimates
estimates need
need to to be
be revised.
revised.
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Slide
9-32

Revising Depreciation Rates

On
On January
January 1,1, 2003,
2003, equipment
equipment was was
purchased
purchased that that cost
cost $30,000,
$30,000, has
has aa useful
useful
life
life of
of 10
10 years
years and
and no
no salvage
salvage value.
value.
During
During 2006,
2006, the
the useful
useful life
life was
was revised
revised to
to 88
years
years total
total (5
(5 years
years remaining).
remaining).

Calculate
Calculate depreciation
depreciation expense
expense for
for the
the year
year
ended
ended December
December 31, 31, 2006,
2006, using
using the
the
straight-line
straight-line method.
method.

01/16/22
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002
 Revising Depreciation Rates
When
Whenour
ourestimates
estimateschange,
change,depreciation
depreciation
is:
is:

Book value at Salvage value at

date of change – date of change

Remaining useful life at date of change

Asset
Assetcost
cost $$ 30,000
30,000
Accumulated
Accumulated depreciation,
depreciation, 12/31/2005
12/31/2005
($3,000
($3,000per
per year
year×× 33years)
years) 9,000
9,000
Remaining
Remaining bookbookvalue
value $$ 21,000
21,000
Divide
Divide by
byremaining
remaining life
life ÷÷55
Revised
Revised annual
annual depreciation
depreciation $$ 4,200
4,200
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9-34

Disposal of Plant and Equipment

Update
Update depreciation
depreciation
to
to the
the date
date of
of disposal.
disposal.

Journalize
Journalize disposal
disposal by:
by:

Recording
Recordingcash
cash Recording
Recordingaa
received
received(debit)
(debit) gain
gain(credit)
(credit)
or
orpaid
paid(credit).
(credit). or
or loss
loss(debit).
(debit).

Removing
Removingaccumulated
accumulated Removing
Removingthethe
depreciation
depreciation(debit).
(debit). asset
assetcost
cost(credit).
(credit).
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Slide
9-35

Disposal of Plant and Equipment

IfIf Cash
Cash >> BV,
BV, record
record aa gain
gain (credit).
(credit).
IfIf Cash
Cash << BV,
BV, record
record aa loss
loss (debit).
(debit).
IfIf Cash
Cash == BV,
BV, no
no gain
gain or
or loss.
loss.

Recording
Recordingcash
cash Recording
Recordingaa
received
received(debit)
(debit) gain
gain(credit)
(credit)
or
orpaid
paid(credit).
(credit). or
or loss
loss(debit).
(debit).

Removing
Removingaccumulated
accumulated Removing
Removingthethe
depreciation
depreciation(debit).
(debit). asset
assetcost
cost(credit).
(credit).
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Slide
9-36

Disposal of Plant and Equipment

On
On September
September 30, 30, 2003,
2003, Evans
Evans Map Map Company
Company
sells
sells aa machine
machine that
that originally
originally cost
cost $100,000
$100,000 for
for
$60,000
$60,000 cash.
cash. The
The machine
machine was was placed
placed in
in
service
service onon January
January 1, 1, 1998.
1998. ItIt has
has been
been
depreciated
depreciated using
using the
the straight-line
straight-line method
method with
with
an
an estimated
estimated salvage
salvage value
value ofof $20,000
$20,000 and
and an
an
estimated
estimated useful
useful life
life of
of 10
10 years.
years.

Let’s
Let’s answer
answer the
the following
following questions.
questions.
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Slide
9-37

Disposal of Plant and Equipment

The
The amount
amount of
of depreciation
depreciation
recorded
recorded onon September
September 30,30, 2003,
2003,
to
to bring
bring depreciation
depreciation up
up to
to date
date is:
is:

a.
a. $8,000.
$8,000. Annual Depreciation:
($100,000 - $20,000) ÷ 10 Yrs. = $8,000
b.
b. $6,000.
$6,000.
c.
c. $4,000.
$4,000. Depreciation to Sept. 30:
d. $2,000. 9/12 × $8,000 = $6,000
d. $2,000.
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Slide
9-38

Disposal of Plant and Equipment

After
After updating
updating the
the depreciation,
depreciation, the
the
machine’s
machine’s book
book value
value on
on
September
September 30,
30, 2003,
2003, is:
is:

a.
a. $54,000.
$54,000. Cost
Cost $$100,000
100,000
Accumulated
AccumulatedDepreciation:
Depreciation:
b.
b. $46,000.
$46,000. (5
(5yrs.
yrs. ××$8,000)
$8,000)++$6,000
$6,000== 46,000
46,000
c.
c. $40,000.
$40,000. Book
BookValue
Value $$ 54,000
54,000
d.
d. $60,000.
$60,000.
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Slide
9-39

Disposal of Plant and Equipment

The
The machine’s
machine’s sale
sale resulted
resulted in:
in:

a.
a. aa gain
gain of
of $6,000.
$6,000.
b.
b. aa gain
gain of
of $4,000.
$4,000.
c.
c. aa loss
loss of
of $6,000.
$6,000.
d.
d. aa loss
loss of
of $4,000.
$4,000. Cost $ 100,000
Accum. Depr. 46,000
Book value $ 54,000
Cash received 60,000
Gain $ 6,000
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Slide
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Trading in Used Assets

for New Ones
Accounting
Accounting depends
depends onon whether
whether
assets
assets are
are similar
similar or
or dissimilar.
dissimilar.

Airplane
Airplane Truck
Truck
for
for for
for
Airplane
Airplane Airplane
Airplane

Only
Only situations
situations where
where cash
cash
is
is paid
paid will
will be
be demonstrated.
demonstrated.
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Slide
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Trading in Used Assets

for New Ones
Dissimilar Similar Assets
Assets and Cash Paid
Recognize
Yes No
Gains?
Recognize
Yes Yes
Losses?

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Trading in Used Assets

for New Ones – Similar Assets
On
On May
May 30,
30, 2003,
2003, Essex
Essex Company
Company
exchanged
exchanged aa usedused airplane
airplane and
and $35,000
$35,000
cash
cash for
for aa new
new airplane.
airplane. The
The old
old airplane
airplane
originally
originally cost
cost $40,000,
$40,000, had
had up-to-date
up-to-date
accumulated
accumulated depreciation
depreciation of
of $30,000,
$30,000, and
and
aa fair
fair value
value of
of $4,000.
$4,000.

SIMILAR

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Trading in Used Assets

for New Ones – Similar Assets
The
The exchange
exchange resulted
resulted in
in a:
a:

Cost $ 40,000
a.
a. gain
gain of
of $6,000.
$6,000. Accum. Depr. 30,000
Book Value $ 10,000
b.
b. loss
loss of
of $6,000.
$6,000. Fair Value 4,000
c.
c. loss
loss of
of $4,000.
$4,000. Loss $ 6,000

d.
d. gain
gain of
of $4,000.
$4,000.
Prepare a journal entry
to record the exchange.
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Trading in Used Assets

for New Ones – Similar Assets
Prepare
Prepare the
the journal
journal entry
entry to
to record
record
the
the trade.
trade.

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Slide
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Which Depreciation Methods
Do Most Businesses Use?
AAsurvey
surveyof
of600
600Publicly
PubliclyOwned
Owned Corporations
Corporations

Straight-line
Straight-line 563
563

Declining-balance
Declining-balance 44
44

Sum-of-the-years'-digits
Sum-of-the-years'-digits 11
11

Accelerated
Acceleratedmethods
methods(not
(notspecified)
specified) 70
70

Units-of-output
Units-of-output 53
53

Other 99
Other

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Slide
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Natural Resources

Total
Total cost,
cost, Extracted
Extracted from
from
including
including the
the natural
natural
exploration
exploration and
and environment
environment
development,
development, and
and reported
reported
is
is charged
charged to
to at
at cost
cost less
less
depletion
depletion expense
expense accumulated
accumulated
over
over periods
periods depletion.
depletion.
benefited.
benefited.

Examples:
Examples: oil,
oil, coal,
coal, gold
gold
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Depletion of Natural Resources

Depletion is calculated using the
units-of-production method.

Unit depletion rate is calculated as follows:

Cost – Salvage Value

Total Units of Capacity

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Depletion of Natural Resources

Total depletion cost for a period is:

Unit Depletion Number of Units

Rate × Extracted in Period

Cost
Costof
of
Total goods
goodssold
sold
Total Inventory
depletion Inventory
depletion for
cost forsale
sale
cost Unsold
Unsold
Inventory
Inventory
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Depletion of Natural Resources

Specialized plant assets may be required

to extract the natural resource.

These assets are recorded in a separate

account and depreciated.
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Intangible Assets
Noncurrent
Noncurrent assets
assets Often
Oftenprovide
provide
without
withoutphysical
physical exclusive
exclusiverights
rights
substance.
substance. or
or privileges.
privileges.

Characteristics
Characteristics

Useful
Usefullife
lifeis
is Usually
Usuallyacquired
acquired
often
oftendifficult
difficult for
foroperational
operational
to
todetermine.
determine. use.
use.
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Intangible Assets
Record at
current cash • Patents
equivalent cost,
including • Copyrights
purchase price, • Leaseholds
legal fees, and • Leasehold
filing fees. Improvements
• Goodwill
• Trademarks and
Trade Names
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Intangible Assets
•• Amortize
Amortize over
over shorter
shorter of
of economic
economic
life
life or
or legal
legal life,
life, subject
subject to
to aa maximum
maximum
of
of 40
40 years.
years.
•• Use
Use straight-line
straight-line method.
method.
•• Research
Research and
and development
development costs
costs are
are
normally
normally expensed
expensed as
as incurred.
incurred.

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Intangible Assets – Goodwill

Goodwill
Goodwill
Occurs
Occurs when
when one
one Only
Only purchased
purchased
company
company buys
buys goodwill
goodwill is
is an
an
another
another company.
company. intangible
intangible asset.
asset.

The
The amount
amount by
by which
which the
the
purchase
purchase price
price exceeds
exceeds the
the fair
fair
market
market value
value of
of net
net assets
assets acquired.
acquired.
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Intangible Assets – Goodwill

Eddy
Eddy Company
Company paid paid $1,000,000
$1,000,000 to
to
purchase
purchase all
all of
of James
James Company’s
Company’s assets
assets
and
and assumed
assumed liabilities
liabilities of
of $200,000.
$200,000. The
The
acquired
acquired assets
assets were
were appraised
appraised at
at aa fair
fair
value
value ofof $900,000
$900,000..

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Intangible Assets – Goodwill

What
What amount
amount of
of goodwill
goodwill should
should be
be
recorded
recorded on
on Eddy
Eddy Company
Company books?
books?

a.
a. $100,000.
$100,000.
b.
b. $200,000.
$200,000.
c.
c. $300,000.
$300,000.
d.
d. $400,000.
$400,000.
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Intangible Assets – Patents

Exclusive
Exclusive right
right granted
granted
by
by federal
federal government
government to to sell
sell or
or
manufacture
manufacture an an invention.
invention.

Cost
Cost is
is purchase
purchase Amortize
Amortize costcost
price
price plus
plus legal
legal over
over the
the shorter
shorter of
of
cost
cost to
to defend.
defend. useful
useful life
life or
or 17
17 years.
years.

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Intangible Assets –
Trademarks and Trade Names
A
A symbol,
symbol, design,
design, oror logo
logo
associated
associated with
with aa business.
business.

Purchased
Internally trademarks
developed are recorded
trademarks at cost, and
have no amortized over
recorded shorter of legal
asset cost. or economic life,
or 40 years.
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Intangible Assets – Franchises

Legally
Legally protected
protected right
right to
to sell
sell products
products
or
or provide
provide services
services purchased
purchased by by
franchisee
franchisee from
from franchisor.
franchisor.

Purchase
Purchase price
price is
is intangible
intangible asset
asset
which
which is
is amortized
amortized over
over the
the shorter
shorter of
of
the
the protected
protected right
right oror 40
40 years.
years.
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Intangible Assets – Copyrights

Exclusive
Exclusive right
right granted
granted by
by the
the
federal
federal government
government to to protect
protect
artistic
artistic or
or intellectual
intellectual properties.
properties.

Legal
Legal life
life is
is Amortize
Amortize cost
cost
life
life of
of creator
creator over
over aa period
period not
not
plus
plus 5050 years.
years. to
to exceed
exceed 40
40 years.
years.

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`
• Leasehold is a form of land tenure or property
tenure where one party buys the right to
occupy land or a building for a given length of
time. As lease is a legal
estate, leasehold estate can be bought and
sold on the open market.

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