Ch+09+Edited

The asset so 5 explain how to account for the

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Unformatted text preview: cates the amount of net income generated by each dollar of assets. Illustration 9-19 Chapter 9-45 SO 6 Describe methods for evaluating the use of plant assets. Chapter 9-46 Analyzing Plant Assets Analyzing Plant Assets Asset Turnover Ratio indicates how efficiently a company uses its assets to generate sales. Illustration 9-20 Chapter 9-47 SO 6 Describe methods for evaluating the use of plant assets. Analyzing Plant Assets Analyzing Plant Assets Profit Margin Ratio Revisited Tells how effective a company is in turning its sales into income— that is, how much income each dollar of sales provides. Illustration 9-21 Illustration 9-22 You can evaluate the return on assets ratio by evaluating its components. Chapter 9-48 SO 6 Describe methods for evaluating the use of plant assets. Intangible Assets Intangible Assets Section Two 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 indefinite life. Common types of intangibles: Trademarks Copyrights Trade names Chapter 9-49 Patents Franchises or licenses Goodwill SO 7 Identify the basic issues related to reporting intangible assets. Accounting for Intangible Assets Accounting for Intangible Assets Amortization of Intangibles Limited-Life Intangibles: Amortize to expense. Credit asset account or accumulated amortization. Indefinite-Life Intangibles: Chapter 9-50 No foreseeable limit on time the asset is expected to provide cash flows. No amortization. SO 7 Identify the basic issues related to reporting intangible assets. Types of Intangible Assets Types of Intangible Assets Patents Capitalize costs of purchasing a patent and amortize over its 20-year life or its useful life, whichever is shorter. Expense any R&D costs in developing a patent. Chapter 9-51 Exclusive right to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the grant. Legal fees incurred successfully defending a patent are capitalized to Patent account. SO 7 Identify the basic issues related to reporting intangible assets. Types of Intangible Assets Types of Intangible Assets Illustration: National Labs purchases a patent at a cost of $60,000 on June 30. National estimates the useful life of the patent to be eight years. Prepare the journal entry to record the amortization for the six-month period ended December 31. Cost Useful life Annual expense 6 months Amortization Dec. 31 Amortization expense Patent Chapter 9-52 $60,000 / 8 $ 7,500 x 6/12 $ 3,750 3,750 3,750 SO 7 Types of Intangible Assets Types of Intangible Assets Research and Development Costs Expenditures that may lead to copyrights, new processes, and Chapter 9-53 patents, new products. All R & D costs are expensed when incurred. SO 7 Identify the basic issues related to reporting intangible assets. Types of Intangible Assets Types of Intangible Assets Copyrights Granted for the life of the creator plus 70 years....
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This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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