ACCTNG 2400 1st Edition Lecture 21Outline of Last Lecture I. Chapter 9 – long-lived tangible and intangible assetsII. Acquisition of tangible assetsa. Basket purchaseIII. Maintenance costs – expenditures and accounting treatmentIV. Depreciation expensea. Measure and recordb. Depreciation methodsOutline of Current LectureI. Asset Impairment LossesII. Disposal of Tangiable AssetsIII. IntangiableAssetsa. Trademarks, copyrights, patents, franchises, licensing, goodwillb. Amortization of intangiable assetsCurrent LectureAsset impairment losses- Impairment is when the estimated value of a long-lived asset falls below it’s net book value due to either casualty (damage), obsolescence, or lack of demand for the asset’s service.- When an asset suffers a permanent impairment, a loss should be recorded (and the asset value reduced).Cedar fair recorded a write-down of $63,000,000 on equipmentDr Loss on impairment (E+, -SE) 63,000,000Cr Rides & equipment (-A) 63,000,000These 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.Disposal of Tangible Assets- When a company is finished using an asset, the asset can be either discarded, sold or exchanged- Before accounting for the disposal, depreciation is updated and the final book value is determinedIntangible Assets- Record at current cash equivalent cost, including purchase price, legal fees and filing fees- Amortize intangibles with limited lives over the shorter of their economic lives or legal lives using the straight-line method- Types: trademarks, copyrights, patents, franchises, licensing rights, software and goodwillTrademarks and copyrights- TRADEMARK- a symbol, design, or logo associated with a businesso Internally developed trademarks have no recorded asset costo Purchased trademarks are recorded at cost- COPYRIGHT – an exclusive right granted by the federal government to protect artistic or intellectual propertieso Legal life is life of creator plus 70 yearso Amortize cost over the period benefited- PATENT – an exclusive right granted by the federal government to sell or manufacture aninventiono Cost is purchase price plus legal cost to defendo Amortize cost over the shorter of the useful life or 20 years- FRANCHISE – provides legally protected rights to sell products or provide services purchased by a franchise from the franchisor- LICENSING RIGHTS – grant limited permission to use a product or service according to specific terms and condition- GOODWILL – occurs only when a company buys a other company and purchase price is more than the fair market value of net assets acquired.o Goodwill is NOT amortized – it is tested for impairment (reduced value) and may be written downType Legal Life Amortize?Trademark Unlimited NoCopyright Creator’s Life + 70 Years YesPatent 20 Years YesFranchise Per Contract YesLicensing Right Per Contract YesSoftware N/A YesGoodwill Unlimited