Since depreciation of the new equipment will be computed based on a cost of Br. Gains on exchanges are recognized for financial reporting purposes when dissimilar assets are exchanged. To illustrate the recognition of a gain, assume the following terms in which the machines being exchanged serve different functions:.
Here the trade-in allowance Br. Assuming that this condition is true, the entry to record the transaction is as follows:. A gain on an exchange should not be recognized in the accounting records if the assets perform similar functions.
The cost basis for the new equipment must indicate the effect of the unrecorded gain. This cost basis is computed by adding the cash payment to the carrying value of the old asset:. As with the no recognition of losses, the no recognition of the gain on exchanges is, in effect, a postponement of the gain. Since depreciation will be computed on the cost basis of Br.
Intangible Assets : are long-term assets that do not have physical substance and in most cases relate to legal rights or advantages held. Intangible assets include patents, copyrights, trademarks, franchises, organization costs, leaseholds, leasehold improvements, and goodwill.
The allocation of intangible assets to the periods they benefits is called amortization. Intangible assets are accounted for at acquisition cost, that is, the amount paid for them. Some intangible assets such as goodwill and trademarks may be acquired at little or no cost. Even though they may have great value and be needed for profitable operations they should not appear on the balance sheet unless they have been purchased from another party at a price established in the market place.
The, Accounting Principles Board APB has decided that a company should record as assets the costs of Intangible assets acquired from others. However, the company should record as expenses the cost of developing intangible assets. Also, intangible assets that have a determinable useful life such as patents, copyrights, and leaseholds, should be written off through periodic amortization over that useful life in much the same way that plant assets are depreciated.
Even though some intangible assets, such as goodwill and trademarks, have no measurable limit on their lives, they should also be amortized over a reasonable length of time not to exceed forty years.
The entry to record the annual amortization would be as follows:. Note that the patent account is reduced directly by the amount of the amortization expense. This is in contrast to other long-term asset accounts in which depreciation or depletion is accumulated in a separate contra account.
If the patent becomes worthless before it is fully amortized, the remaining carrying value is written off as a loss. The entry to record the loss is:. We now turn our attention to another group of long-lived assets natural resources, such as minerals, oil, and timber or lumber. These natural resources are extracted from the earth. Depletion is the accounting measure used to allocate the acquisition cost of natural resources.
Depletion differs from depreciation because depletion focuses specifically on the physical use and exhaustion of the natural resources, while depreciation focuses more broadly on any reduction of the economic value of a plant or fixed asset.
The costs of natural resources are usually classified as long-terms assets. Service Desk. Campus environment Information about ANU buildings, rooms, gardens, car parks, roads and more. Campus development Heritage.
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Overview of the disposal process The Australian National University Act section 45 requires that ' To dispose of an asset, budget units are responsible for: completing the Asset Disposal Form ; obtaining approval for disposal of the asset; the actual disposal of the asset; processing the system removal of the asset via the Asset Retirements Panel Group in ESP; and forwarding the completed Asset Disposal Form and supporting documentation to Statutory and Management Reporting, Finance and Business Services, Chancelry 10C.
Finance and Business Services is responsible for: reviewing the disposal process; confirming the removal of the asset from ESP; ensuring the integrity between the General Ledger and ESP; providing advice and assistance on related assets matters.
Preparing the asset disposal form The University removes assets from the registers when they are obsolete, unserviceable, traded-in, sold, missing or disposed of by other means.
The the asset details i. Who can approve the retirement of ANU assets? Heads of budget units such as Deans, Heads of Research Schools etc have the authority to: declare equipment to be no longer serviceable or saleable; declare lost or deficient equipment to be irrecoverable; declare equipment to have a reduced value; and authorise the sale, by auction, trade-in, private treaty or otherwise of equipment no longer required by ANU. Sale by private treaty may be arranged where: there is only one apparent purchaser; the cost of sale by other means would exceed the likely realisable value of the item; or the sale to an educational or charitable institution is contemplated.
In considering approval for Private Treaty arrangements business offices are required to assess the sale in terms of the following: Is the asset surplus to ANU requirements? As noted earlier, book value is the difference between the cost of a plant asset and the accumulated depreciation to date.
The equipment, therefore, is fully depreciated zero book value. The entry to record this retirement is as follows. The entry is as follows. Wright records depreciation expense and updates accumulated depreciation to July 1 with the following. AGM has decided to sell the truck. Total views 18, On Slideshare 0.
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