Ordinarily, companies record a

gain or loss on exchange of plant

assets

Exchange of Most exchanges have

commercial substance
Plant Assets

Commercial substance if future

cash flows change as a result of
exchange

Copyright ©2019 John Wiley & Son, Inc. 1

Cost of used trucks €64,000
Less: Accumulated Loss Treatment
22,000
depreciation
Book value 42,000 Illustration:
Fair market value of Roland NV exchanged old trucks
26,000
used trucks (cost €64,000 less €22,000
Loss on disposal of accumulated depreciation) plus cash
€16,000
plant assets of €17,000 for a new semi-truck.
The old trucks had a fair market
Fair market value of value of €26,000.
€26,000
used trucks
Cash paid 17,000
Cost of new truck €43,000

Copyright ©2019 John Wiley & Son, Inc. 2

 Loss Treatment
Illustration: Roland NV exchanged old trucks (cost €64,000 less
€22,000 accumulated depreciation) plus cash of €17,000 for a
new semi-truck. The old trucks had a fair market value of
€26,000. Prepare the entry to record the exchange of assets by
Roland.

Equipment (new) 43,000

Accumulated Depreciation—Equipment 22,000
Loss on Disposal of Plant Assets 16,000
Equipment (old) 64,000
Cash 17,000

Copyright ©2019 John Wiley & Son, Inc. 3

Cost of old equipment €40,000 Gain Treatment
Less: Accumulated
28,000
depreciation
Book value 12,000 Illustration:
Fair market value of old Mark Express trades its old delivery
19,000 equipment (cost €40,000 less €28,000
equipment
Gain on disposal of plant accumulated depreciation) for new
€ 7,000 delivery equipment. The old equipment
assets had a fair market value of €19,000. Mark
Fair market value of old also paid €3,000.
€19,000
equipment
Cash paid 3,000
Cost of new equipment €22,000

Copyright ©2019 John Wiley & Son, Inc. 4

 Gain Treatment
Illustration: Mark Express trades its old delivery equipment (cost
€40,000 less €28,000 accumulated depreciation) for new
delivery equipment. The old equipment had a fair market value
of €19,000. Mark also paid €3,000.

Equipment (new) 22,000

Accumulated Depreciation—Equipment 28,000
Equipment (old) 40,000
Gain on Disposal of Plant Assets 7,000
Cash 3,000

Copyright ©2019 John Wiley & Son, Inc. 5

Intangible Assets
Weygandt ● Kimmel ● Kieso
IFRS 4th Edition

Akuntansi Pengantar II
Progdi Perpajakan
Semeseter Genap 2021/2022
Intangible Assets
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:
• Patents • Trademarks
• Copyrights • Trade names
• Franchises and Licenses • Goodwill

Copyright ©2019 John Wiley & Sons, Inc. 7

 • Limited-Life Intangibles:
• Amortize to expense
• Credit asset account or
accumulated amortization
Accounting for • Indefinite-Life Intangibles:
Intangible Assets • No foreseeable limit on time
asset is expected to provide
cash flow
• No amortization

Copyright ©2019 John Wiley & Sons, Inc. 8

 Patents
• Amortize to expense
• Exclusive right to manufacture, sell, or
otherwise control an invention for 20 years
from date of grant
• Capitalize costs of purchasing a patent and
Accounting for amortize over 20-year life or its useful life,
Intangible whichever is shorter
• Expense any R&D costs in developing a
Assets patent
• Legal fees incurred successfully defending a
patent are capitalized to Patents account

Copyright ©2019 John Wiley & Son, Inc. 9

Accounting for Intangible Assets
Illustration: National Labs purchases a patent at a cost of NT$720,000.
National estimates the useful life to be eight years. Prepare the journal entry
to record the annual amortization for the year ended December 31.

Cost NT$720,000
Useful life ÷ 8
Amortization NT$ 90,000

Dec. 31 Amortization Expense 90,000

Patents 90,000

Copyright ©2019 John Wiley & Sons, Inc. 10

Accounting for Intangible Assets

Copyrights
• Gives owner exclusive right to reproduce and sell an
artistic or published work
• Granted for life of creator plus 70 years
• Capitalize costs of acquiring and defending
• Amortized to expense over useful life

Copyright ©2019 John Wiley & Sons, Inc. 11

Copyright ©2019 John Wiley & Sons, Inc.

Trademarks and Trade Names

Accounting for • Word, phrase, jingle, or symbol that
distinguishes or identifies a particular
Intangible enterprise or product
Assets • Big Mac, Coca-Cola, and Jetta
• Legal protection for indefinite number of
20 year renewal periods
• Capitalize acquisition costs
• No amortization

12
Accounting for Intangible Assets

Franchises
• Contractual arrangement between
a franchisor and a franchisee
• CPC, Subway, and Europcar are
franchises
• Franchise (or license) with a limited
life should be amortized to expense
over its useful life
• If life is indefinite, cost is not
amortized
Copyright ©2019 John Wiley & Son, Inc. 13
Accounting for Intangible Assets
Goodwill
• Includes exceptional management, desirable
location, good customer relations, skilled
employees, high-quality products, etc.
• Only recorded when an entire business is
purchased
• Goodwill is recorded as excess of purchase price
over fair value of net assets acquired
• Not amortized

Copyright ©2019 John Wiley & Son, Inc. 14

Research and
Development Costs

• Expenditures that may lead to

patents, copyrights, new
processes, new products.
• All R & D costs are expensed when
incurred
• Not intangible assets

Copyright ©2019 John Wiley & Son, Inc. 15

 Statement Presentation
Artex Enterprises Statement
Statement of Financial Position (partial)
(in billions) Presentation and
Property, plant, and equipment
Gold mine ¥ 530
Analysis
Less: Accumulated depletion 210 ¥ 320
Land 600
Buildings 7,600
Less: Accumulated depreciation—buildings 500 7,100
Equipment 3,870
Less: Accumulated depreciation—
equipment 620 3,250
Total property, plant, and equipment ¥11,270
Intangible assets
Patents 440
Trademarks 180
Goodwill 900 1,520
Total assets ¥12,790
Copyright ©2019 John Wiley & Son, Inc.
16
Analysis
Illustration: LG’s net sales for a recent year were ₩58,140
billion. Its total ending assets were ₩35,528 billion, and
beginning assets were ₩34,766 billion.

Net Sales ÷ Average Total Assets = Asset Turnover

₩35,528 + ₩34,766
₩58,140 ÷ = 1.65 Times
2

Each dollar invested in assets produced ₩1.65 in sales. If a

company is using its assets efficiently, each investment in
assets will create a high amount of sales.
Copyright ©2019 John Wiley & Son, Inc. 17
Thank you
Rini Hastuti, SE.,MSi.,CA
Soal 1

For each of the following unrelated transactions, (a) determine the amount of the
amortization or depletion expense for the current year, and (b) present the
adjusting entries required to record each expense at year end.
(1)Timber rights were purchased on a tract of land for $360,000. The timber is
estimated at 1,200,000 board feet. During the current year, 75,000 board feet
of timber were cut and sold.
(2)Costs of $14,000 were incurred on January 1 to obtain a patent. Shortly
thereafter, $28,000 was spent in legal costs to successfully defend the patent
against competitors. The patent has an estimated legal life of 12 years.
Soal 2

a. A company purchased a patent on January 1, 2020, for ¥2,500,000. The patent’s legal life
is 20 years but the company estimates that the patent’s useful life will only be 5 years
from the date of acquisition. On June 30, 2020, the company paid legal costs of ¥135,000
in successfully defending the patent in an infringement suit. Prepare the journal entry to
amortize the patent at year end on December 31, 2020.
b. Clark Company purchased a franchise from Tastee Food Company for $400,000 on
January 1, 2020. The franchise is for an indefinite time period and gives Clark Company
the exclusive rights to sell Tastee Wings in a particular territory. Prepare the journal entry
to record the acquisition of the franchise and any necessary adjusting entry at year end
on December 31, 2020.
c. Hulse Company incurred research costs of $500,000 in 2020 in developing a new
product. Prepare the necessary journal entries during 2020 to record these events and
any adjustments at year end on December 31, 2020.