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69 note that the patent account is reduced directly

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69
Note that the patent account is reduced directly by the amount of the amortizationNote that the patent account is reduced directly by the amount of the amortizationexpense. This is in contrast to other long-term asset accounts in which depreciation orexpense. This is in contrast to other long-term asset accounts in which depreciation ordepletion is accumulated in a separate contra account.depletion is accumulated in a separate contra account.If the patent becomes worthless before it is fully amortized, the remaining carrying valueIf the patent becomes worthless before it is fully amortized, the remaining carrying valueis written off as a loss. For instance, assume that after the first two years MOHA softis written off as a loss. For instance, assume that after the first two years MOHA softDrink Bottling Company’s chief competitor’s offers a bottle with a new type of cap thatDrink Bottling Company’s chief competitor’s offers a bottle with a new type of cap thatmakes MOHA’s cap obsolete. The entry to record the loss is:makes MOHA’s cap obsolete. The entry to record the loss is:Loss on patent……………………………36,000.00Loss on patent……………………………36,000.00Patent……………………………………36,000.00Patent……………………………………36,000.00To record the loss resulting from patents becomingTo record the loss resulting from patents becomingworthless.worthless.Depletion of Natural ResourcesDepletion of Natural ResourcesWe now turn our attention to another group of long-lived assets natural resources, such asWe now turn our attention to another group of long-lived assets natural resources, such asminerals, oil, and timber or lumber. These natural resources are extracted from the earth.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 naturalDepletion is the accounting measure used to allocate the acquisition cost of naturalresources. Depletion differs from depreciation because depletion focuses specifically onresources. Depletion differs from depreciation because depletion focuses specifically onthe physical use and exhaustion of the natural resources, while depreciation focuses morethe physical use and exhaustion of the natural resources, while depreciation focuses morebroadly on any reduction of the economic value of a plant or fixed asset. The costs ofbroadly on any reduction of the economic value of a plant or fixed asset. The costs ofnatural resources are usually classified as long-terms assets.natural resources are usually classified as long-terms assets.Depletion expense is the measure of that portion of long-term assets that is used up in aDepletion expense is the measure of that portion of long-term assets that is used up in aparticular period.particular period.

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