ACCT 200 1nd Edition Lecture 13 Outline of Last Lecture II. Plant AssetsIII. Determining the Cost for Plant AssetsIV. Accounting for Plant AssetsOutline of Current Lecture V. Accounting for Plant Assets continuedVI. Analyzing Plant AssetsVII. Intangible AssetsVIII. Financial Statement Presentation of Long-Lived AssetsCurrent LectureChapter 9 ContinuedReporting and Analyzing Long- Lived AssetsPlant Asset Disposals- Companies dispose of plant assets in three wayso Retirement- equipment is scrapped or discardedo Sale- equipment is sold to another partyo Exchange- existing equipment is traded for new equipment- Record deprecation up to the date of disposal- Eliminate asset by removing assets and removing accumulated deprecationSale of plant assets- Compare the book value of the asset with the proceeds received from the saleo If proceeds exceed the book value, Gain >>> looks like revenue, expect credito If proceeds are less than the book value, Loss >>> looks like expense, expect debitPlant asset disposals- Retirement of plant assetso No casho No saleo Decrease accumulated deprecation = debito Decrease asset = creditThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Analyzing Plant AssetsReturn on asset- Indicates the amount of net income generated by each dollar of assets- Every dollar invested in assets gives you ____ net incomeAsset Turnover- Indicates how efficiently a company uses its assets to generate salesAsset turnover = net sales / average total assetsIntangible Assets Intangible assets- Are rights privileges and competitive advantages that result from ownership of long- lived assets that do not possess physical substance- Limited life or an indefinitely life- Common types of intangibleso Patents, copyrights, franchises, trademarks, trade names, goodwill Accounting for Intangibles- Limited life intangibles:o Amortize to expense = deprecationo Credit asset account- Indefinite- life intangibleso No foreseeable limit on time the asset is expected to provide cash flowso No amortizationTypes of intangible assets- Patentso Exclusive right to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of granto Capitalize costs of purchasing a patent and amortize over its 20-year life or its useful life, whichever is shortero Expense R and D costs in developing a patento Legal fees incurred successfully defending a patent are capitalized to Patent account- Expenditures (research and development costs)o Patentso Copyrightso New processeso New products- Copyrightso Give the owner the exclusive right to reproduce and sell an artistic or published worko Granted for the life of the creator plus 70 yearso Capitalize costs of acquiring and defending ito Amortized to expense over useful life- Trademarks and trade nameso Word, phase, jingle, or symbol that identifies a particular enterprise or product Wheaties, monopoly, Sunkist, Kleenex, coca-cola, big mac, and jeepo Legal protection for indefinite number of 20 year renewal periodso Capitalize acquisition costso No amortization- Franchiseso Contractual arrangement between a franchisor and a franchisee Toyota, Shell, Subway, and Marriott are franchiseso Franchise (or license) with a limited life should be amortized to expense over the life of the franchiseo Franchise with an indefinite life should be carried at cost and not amortized- Goodwillo Includes exceptional management, desirable location, good customer relations, skilled employees, high-quality products etc.o Only recorded when an entire business is purchasedo Goodwill is recorded as the excess of Purchase price over the fair market value (FMV) of the identifiable net assets acquiredo Internally created goodwill should not be