ACCT 200 1st Edition Lecture 15 Outline of Last Lecture I. Test InfoII. BE 7-1III. BE 7-2IV. Basket PurchaseV. Goodwill VI. BE 7-3VII. E 7-7VIII. BE 7-5IX. E 7-5X. BE 7-7Outline of Current Lecture I. Costs of Tangible/Intangible AssetsII. Slide 29 Key Terms ReviewIII. Similar Problem to Homework 2IV. E 7-16V. Gains/Losses on DisposalVI. BE 7-10Current LectureCost of tangible asset: all costs to get it ready for its intended use: purchase price, any one time costs (sales tax, customization, testing, and installation)Does NOT include: annual costs for annual license or annual insuranceCost of intangible asset: initial costs to purchase it plus legal defense costs ongoing; costs once itis viable, such as legal costs to get a patent through government channelsSlide 29 key terms review:Accumulated depreciation – contra asset found on balance sheet, listed with tangible assets andsubtracted to get net valueBook value (specific asset)=cost–accumulated depreciationUseful life=estimated life of the assetSalvage or residual value=expected value at the end of the useful lifeSimilar problem to homework:Cost of equipment 200,000Useful life 10 yearsSalvage value 10,000Purchase it on 8/1/12Calculate annual depreciation=(cost-salvage)/life(200,000-10,000)/10=19,000 per yearOwn it in 2012 from Aug-Dec (5 months)19,000*(5/12)=791712/31/2008 Depreciation expense 7917Acc Dep. 791712/31/2009 Same debit and credit, but amount is 19,000Year Cost Annual Dep. Accumulated Dep. Book Value2008 200,000 7917 7917 192,083 (200,000-7917)2009 200,000 19,000 26,917 173,083 (200,000-26,917)2010 200,000 19,000 45,917 154,083(2011-2017 – cost and annual dep. the same)10th year:2018 200,000 11,083 190,000 10,000*First year is a fraction of a year, second year through ninth year are full years, last year is remainder of first year not usedBook value=salvage value in the last yearE 7-16Purchase a patent for $240,000 in 2012Legal life is 20 years but only expect 6 more years of usefulnessIncur 60,000 in legal fees in 2014Purchase entry1/1/12 patent 240,000cash 240,00012/31/12 amortization expense 40,000 (240,000/6)patent 40,000^same for 12/31/131/14 patent60,000cash 60,000Patent value=240,000-40,000-40,000+60,000=220,000Used 2 of the 6 years so this is over 4 years220,000/4=55,000 per year for the remaining years12/31/14 amortization expense 55,000patent 55,000Gain on disposal=other revenue (after operating income)Loss on disposal=other expense (also after operating income)Both are found on income statement but aren’t part of sales or operating expenses BE 7-10Sold equipment – 12,000 cashEquipment cost – 80,000Accum deprec to date of sale=66,000What is gain or loss?Proceeds=12,000Cost=80,000Accum dep=-66,000Book value=14,000Loss=-2000Journal entry:cash 12,000Accum dep 66,000Loss on dis 2000 Equipment 80,000 If we sell it for 18,000, gain is
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