Plant Assets,

Chapter
Natural Resources,

10 and Intangibles

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Plant
Plant Assets
Assets
Tangible in Nature

Actively Used in Operations

Expected to Benefit Future Periods

Called Property, Plant, & Equipment

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Plant
Plant Assets
Assets
Plant Assets as a Percent of Total Assets
90%
78%
80%
70%
59%
60%
51%
50%
40%
30%
20%
10% 5%
0%
eBay Wal-Mart Anheuser- McDonald's
Busch
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Plant
Plant Assets
Assets
Decl
ine in
over a sse
it s u t va lu
s ef u e
l li f e

Use
Acquisition 2. Allocate cost to periods Disposal
1. Compute cost. benefited. 4. Record disposal
3. Account for subsequent
expenditures.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Cost
Cost Determination
Determination

Purchase All
price expenditures
needed to
Acquisition prepare the
Cost asset for its
intended use

Acquisition cost excludes

financing charges and
cash discounts.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Land
Land
Title insurance premiums

Purchase Delinquent
price taxes

Real estate Surveying

commissions fees

Title search and transfer fees

Land is not depreciable.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Land
Land Improvements
Improvements
Parking lots, driveways, fences, walks,
shrubs, and lighting systems.

Depreciate over
useful life of
improvements.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Buildings
Buildings
Cost of purchase or
construction Title fees

Brokerage Attorney fees

fees

Taxes

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Machinery
Machinery and
and Equipment
Equipment

Purchase
price Taxes

Transportation
charges

Installing,
assembling, and Insurance while
testing in transit

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Lump-Sum
Lump-Sum Asset
Asset Purchase
Purchase
The total cost of a combined
purchase of land and building
is separated on the basis of
their relative market values.

On January 1, Matrix, Inc. purchased land and

building for $200,000 cash. The appraised values
are building, $162,500, and land, $87,500.

How much of the $200,000 purchase price will be

charged to the building and land accounts?

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Lump-Sum
Lump-Sum Asset
Asset Purchase
Purchase

Appraised % of Purchase Apportioned

Asset Value Value Price Cost
a b* c b × c
Land $ 87,500 35% × $ 200,000 = $ 70,000
Building 162,500 65% × 200,000 = 130,000
Total $ 250,000 100% $ 200,000

* $87,500 ÷ $250,000 = 35%

$162,500 ÷ $250,000 = 65%

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Depreciation
Depreciation
Depreciation is the process of allocating
the cost of a plant asset to expense in the
accounting periods benefiting from its use.

Balance Sheet Income Statement

Acquisition Cost
Expense
Cost Allocation
(Unused) (Used)

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Factors
Factors in
in Computing
Computing Depreciation
Depreciation
The calculation of depreciation requires
three amounts for each asset:

 Cost.

 Salvage Value.
 Useful Life.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Depreciation
Depreciation Methods
Methods

 Straight-line
 Units-of-production
 Declining balance

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Straight-Line
Straight-Line Method
Method

Depreciation Cost - Salvage Value

=
Expense for Period Useful life in periods

On January 1, 2004, equipment was

purchased for $50,000 cash. The
equipment has an estimated useful
life of 5 years and an estimated
residual value of $5,000.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Straight-Line
Straight-Line Method
Method

Depreciation Cost - Salvage Value

=
Expense for Period Useful life in periods

Depreciation $50,000 - $5,000

= = $9,000
Expense per Year 5 years

Dec. 31 Depreciation Expense 9,000

Accumulated Depreciation - Equipment 9,000
To record annual depreciation

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Straight-Line
Straight-Line Method
Method
Depreciation Accumulated
Expense Depreciation Accumulated Book
Year (debit) (credit) Depreciation Value
$ 50,000
2004 $ 9,000 $ 9,000 $ 9,000 41,000
2005 9,000 9,000 18,000 32,000
2006 9,000 9,000 27,000 23,000
2007 9,000 9,000 36,000 14,000
2008 9,000 9,000 45,000 5,000
$ 45,000 $ 45,000
Salvage Value

Depreciation
= (100% ÷ 5 years) = 20% per year
Rate
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 $9,000

Depreciation
Expense
$7,000 Depreciation Expense
$5,000 reported on the
$3,000
Income Statement.

$1,000
$0
2004 2005 2006 2007 2008
For the year ended December 31

$45,000
$40,000 $41,000
$35,000
$32,000
Book Value

$30,000
$25,000
Book Value $23,000
$20,000
reported on the $15,000 $14,000
Balance Sheet. $10,000
$5,000 $5,000
$0
2004 2005 2006 2007 2008
As of December 31

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Units-of-Production
Units-of-Production Method
Method
Step 1:
Depreciation = Cost - Salvage Value
Per Unit Total Units of Production

Step 2:
Number of
Depreciation Depreciation
= × Units Produced
Expense Per Unit
in the Period

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Units-of-Production
Units-of-Production Method
Method
On December 31, 2001, equipment was
purchased for $50,000 cash. The equipment is
expected to produce 100,000 units during its
useful life and has an estimated salvage value
of $5,000.

If 22,000 units were produced in 2002, what

is the amount of depreciation expense?

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Units-of-Production
Units-of-Production Method
Method
Step 1:
Depreciation = $50,000 - $5,000
= $.45 per unit
Per Unit 100,000 units

Step 2:
Depreciation
Expense = $.45 per unit × 22,000 units = $9,900

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Units-of-Production
Units-of-Production Method
Method
Depreciation Accumulated Book
Year Units Expense Depreciation Value
$ 50,000
2004 22,000 $ 9,900 $ 9,900 40,100
2005 28,000 12,600 22,500 27,500
2006 - - 22,500 27,500
2007 32,000 14,400 36,900 13,100
2008 18,000 8,100 45,000 5,000
100,000 $ 45,000

No depreciation expense if the equipment is idle.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Declining
Declining Balance
Balance Method
Method
Depreciation Repair
Expense Expense
Early Years High Low
Later Years Low High

Early years’ total expense approximates

later years’ total expense.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Double-Declining-Balance
Double-Declining-Balance Method
Method
Step 1:
Straight-line
= 100 % ÷ Useful life = 100% ÷ 5 = 20%
rate

Step 2:
Double-declining-
= 2 × Straight-line rate = 2 × 20% = 40%
balance rate

Step 3:
Depreciation Double-declining- Beginning period
expense = balance rate × book value
40% × $50,000 = $20,000 for 2004

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Double-Declining-Balance
Double-Declining-Balance Method
Method
2004
Depreciation:
40% × $50,000 = $20,000

2005
Depreciation:
40% × ($50,000 - $20,000) = $12,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Double-Declining-Balance
Double-Declining-Balance Method
Method

Depreciation Accumulated Book

Year Expense Depreciation Value
$ 50,000
2004 $ 20,000 $ 20,000 30,000
2005 12,000 32,000 18,000
2006 7,200 39,200 10,800
2007 4,320 43,520 6,480
2008 2,592 46,112 3,888
$ 46,112 Below salvage value

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Double-Declining-Balance
Double-Declining-Balance Method
Method

Depreciation Accumulated Book

Year Expense Depreciation Value
$ 50,000
2004 $ 20,000 $ 20,000 30,000
2005 12,000 32,000 18,000
2006 7,200 39,200 10,800
2007 4,320 43,520 6,480
2008 1,480 45,000 5,000
$ 45,000

We usually must force depreciation expense in the

McGraw-Hill/Irwin
last year so that book value equals salvage value.
© The McGraw-Hill Companies, Inc., 2005
 Comparing
Comparing Depreciation
Depreciation Methods
Methods
$10,000
$16,000
$8,000
Depreciation

Annual Production
$14,000
Annual SL

Depreciation
$6,000 $12,000
$10,000
$4,000
$8,000
$2,000 $6,000
$4,000
$0
$2,000
1 2 3 4 5
Life in Years $0
1 2 3 4 5
$20,000 Life in Years
Depreciation
Annual DDB

$15,000

$10,000

$5,000

$0
1 2 3 4 5
McGraw-Hill/Irwin Life in Years © The McGraw-Hill Companies, Inc., 2005
 Depreciation
Depreciation for
for Tax
Tax Reporting
Reporting

Most corporations use the Modified

Accelerated Cost Recovery System
(MACRS) for tax purposes.
MACRS depreciation provides for rapid
write-off of an asset’s cost in order to
stimulate new investment.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Partial-Year
Partial-Year Depreciation
Depreciation
When
When aa plant
plant asset
asset is
is acquired
acquired
during
during the
the year,
year, depreciation
depreciation is
is
calculated
calculated for
for the
the fraction
fraction of
of the
the
year
year the
the asset
asset is
is owned.
owned.

J une
30

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Partial
Partial Year
Year Depreciation
Depreciation
Calculate the straight-line depreciation on
December 31, 2004, for equipment purchased
on June 30, 2004. The equipment cost
$75,000, has a useful life of 10 years and an
estimated salvage value of $5,000.

Depreciation
Depreciation == ($75,000
($75,000 -- $5,000)
$5,000) ÷÷ 10
10
== $7,000
$7,000 for
for all
all 2004
2004
66
Depreciation
Depreciation == $7,000
$7,000 ×× /12 = $3,500
12 = $3,500

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Change
Change in
in Estimates
Estimates for
for Depreciation
Depreciation

Predicted Predicted
salvage value useful life

So depreciation
is an estimate.

Over
Over the
the life
life of
of an
an asset,
asset, new
new information
information
may
may come
come to to light
light that
that indicates
indicates the
the
original
original estimates
estimates were
were inaccurate.
inaccurate.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Change
Change in
in Estimates
Estimates for
for Depreciation
Depreciation
On January 1, 2004, equipment was purchased that
cost $30,000, has a useful life of 10 years and no
salvage value. During 2007, the useful life was
revised to 8 years total (5 years remaining).
Calculate depreciation expense for the year
ended December 31, 2004, using the
straight-line method.

Book value at Salvage value at

date of change
– date of change
Remaining useful life at date of change
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Change
Change in
in Estimates
Estimates for
for Depreciation
Depreciation
Asset cost $ 30,000
Accumulated depreciation, 12/31/2006
($3,000 per year × 3 years) 9,000
Remaining book value $ 21,000
Divide by remaining life ÷ 5
Revised annual depreciation $ 4,200

Dec. 31 Depreciation Expense 4,200

Accumulated Depreciation - Equipment 4,200
To record depreciation for 2007

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Reporting
Reporting Depreciation
Depreciation
Property, plant, and equipment:
Land and buildings $ 150,000
Machinery and equipment 200,000
Office furniture and equipment 175,000
Land improvements 50,000
Total $ 575,000
Less Accumulated depreciation (122,000)
Net property, plant, and equipment $ 453,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Additional
Additional Expenditures
Expenditures
Financial Statement Effect
Current Current
Treatment Statement Expense Income Taxes

Capital Balance sheet

Expenditure account debited Deferred Higher Higher
Revenue Income statement Currently
Expenditure account debited recognized Lower Lower

If
If the
the amounts
amounts involved
involved are
are not
not material,
material,
most
most companies
companies expense
expense the
the item.
item.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Revenue
Revenue and
and Capital
Capital Expenditures
Expenditures
Type of Capital or
Expenditure Revenue Identifying Characteristics
Ordinary Revenue 1. Maintains normal operating condition.
Repairs 2. Does not increase productivity.
3. Does not extend life beyond original
estimate.
Betterments Capital 1. Major overhauls or partial
and replacements.
Extraordinary 2. Extends life beyond original estimate.
Repairs

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Disposals
Disposals of
of Plant
Plant Assets
Assets
Update depreciation
to the date of disposal.

Journalize disposal by:

Recording cash Recording a

received (debit) gain (credit)
or paid (credit). or loss (debit).

Removing accumulated Removing the

depreciation (debit). asset cost (credit).
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Discarding
Discarding Plant
Plant Assets
Assets
Update depreciation
If Cash > BV, record a gain (credit).
to the date of disposal.
If Cash < BV, record a loss (debit).
If Cash =Journalize
BV, no gain or loss.
disposal by:

Recording cash Recording a

received (debit) gain (credit)
or paid (credit). or loss (debit).

Removing accumulated Removing the

depreciation (debit). asset cost (credit).
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Selling
Selling Plant
Plant Assets
Assets
On September 30, 2004, Evans Company
sells a machine that originally cost
$100,000 for $60,000 cash. The machine
was placed in service on January 1, 2000.
It was depreciated using the straight-line
method with an estimated salvage value
of $20,000 and a useful life of 10 years.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Selling Plant Assets
Update
Update Depreciation
Depreciation to
to Date
Date of
of Disposal
Disposal

Annual Depreciation:
($100,000 - $20,000) ÷ 10 Yrs. = $8,000

Depreciation to September 30, 2004:

9/12 × $8,000 = $6,000

Sep. 30 Depreciation expense 6,000

Accumulated Depreciation - Machine 6,000
To update depreciation to date of disposal

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Selling Plant Assets
Determine
Determine Book
Book Value
Value of
of Asset
Asset

Cost $ 100,000
Accumulated Depreciation:
( yrs. × $8,000) + $6,000 = 38,000
Book Value $ 62,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Selling Plant Assets
Determine
Determine Gain
Gain or
or Loss
Loss on
on Disposal
Disposal
If Cash > BV, record a gain (credit).
If Cash < BV, record a loss (debit).
If Cash = BV, no gain or loss.
Cost $ 100,000
Accumulated depreciation 38,000
Book Value 62,000
Cash Received 60,000
Loss on disposal $ (2,000)

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Selling Plant Assets
Record
Record the
the Disposal
Disposal in
in the
the Journal
Journal

Sep. 30 Cash 60,000

Accumulated Depreciation - Machine 38,000
Loss on Disposal of Asset 2,000
Machine 100,000
To record disposal of equipment

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Exchanging
Exchanging Plant
Plant Assets
Assets
SIMILAR

Accounting for exchanges of

similar assets depends on
whether the book value of the
asset(s) given up is less or
more than the market value of
the asset(s) received.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Exchanging
Exchanging Plant
Plant Assets
Assets
SIMILAR

Accounting for exchanges of similar assets

depends on whether the book value of the asset(s)
given up is less or more than the market value of
the asset(s) received.

A loss is recognized A gain is not

when the book value
given up is less than
the market value
received.
McGraw-Hill/Irwin
recognized when the
book value given up is
more than the market
value received.
© The McGraw-Hill Companies, Inc., 2005
 Exchanging
Exchanging Plant
Plant Assets
Assets

On May 30, 2004, Matrix, Inc. exchanged a used

bus and $35,000 cash for a new European-style
bus. The old bus originally cost $40,000, had up-
to-date accumulated depreciation of $30,000. The
new bus had a market value of $39,000.

SIMILAR

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Exchanging
Exchanging Plant
Plant Assets
Assets
Market value of asset received $ 39,000
Cost of old bus $ 40,000
Accumulated depreciation 30,000
Book value of old bus 10,000
Cash 35,000 45,000
Loss on exchange $ 6,000

May 30 Bus (new) 39,000

Accumulated Depreciation - Bus 30,000
Loss on Exchange 6,000
Bus (old) 40,000
Cash 35,000
Remember -- Losses are always recorded immediately.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Exchanging
Exchanging Plant
Plant Assets
Assets
On May 30, 2004, Matrix, Inc. exchanged a
used bus and $35,000 cash for a new
European-style bus. The old bus originally
cost $40,000, had up-to-date accumulated
depreciation of $30,000. The new bus had a
market value of $49,000.

SIMILAR

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Exchanging
Exchanging Plant
Plant Assets
Assets
Market value of asset received $ 49,000
Cost of old bus $ 40,000
Accumulated depreciation 30,000
Book value of old bus 10,000
Cash 35,000 45,000
Gain on exchange $ 4,000

May 30 Bus (new) 45,000

Accumulated Depreciation - Bus 30,000
Bus (old) 40,000
Cash 35,000

Market value of new bus – gain not recognized

$49,000 - $4,000 = $45,000
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Exchanging
Exchanging Plant
Plant Assets
Assets
Comparison of Treatment of Gains and Losses

The $4,000 gain in not recognized

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Let’s change the subject!
Let’s
Let’s Talk
Talk About
About Natural
Natural Resources!
Resources!

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Natural
Natural Resources
Resources

Total cost,
Extracted from
including
the natural
exploration and
environment
development,
and reported
is charged to
at cost less
depletion expense
accumulated
over periods
depletion.
benefited.

Examples: oil, coal, gold

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Cost
Cost Determination
Determination and
and Depletion
Depletion
Step 1:
Depletion = Cost - Salvage Value
Per Unit Total Units of Capacity

Step 2:
Units Extracted
Depletion Depletion
= × and Sold in
Expense Per Unit
Period

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Depletion
Depletion of
of Natural
Natural Resources
Resources
Apex Mining acquired a tract of land
containing ore deposits. Total costs of
acquisition and development were
$1,000,000 and Apex estimates the land
contained 40,000 tons of ore. During the
first year of operations Apex extracted and
sold 13,000 tons of ore.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Units-of-Production
Units-of-Production Method
Method
Step 1:
Depletion = $1,000,000 - $0
= $25 per ton
Per Unit 40,000 tons

Step 2:
Depletion
Expense = $25 per ton × 13,000 units = $325,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Plant
Plant Assets
Assets Used
Used in
in Extracting
Extracting Natural
Natural
Resources
Resources

 Specialized plant assets may be required to

extract the natural resource.
 These assets are recorded in a separate
account and depreciated.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Let’s change the subject!
Now
Now Let’s
Let’s Look
Look at
at Intangible
Intangible Assets!
Assets!

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Intangible
Intangible Assets
Assets
Noncurrent
Noncurrent assets
assets Often
Often provide
provide
without
without physical
physical exclusive
exclusive rights
rights
substance.
substance. or
or privileges.
privileges.

Intangible
Assets

Useful
Useful life
life is
is Usually
Usually acquired
acquired
often
often difficult
difficult for
for operational
operational
to
to determine.
determine. use.
use.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 Cost
Cost Determination
Determination and
and Amortization
Amortization
Record at
current cash o Patents
equivalent cost, o Copyrights
including o Leaseholds
purchase price, o Leasehold Improvements
legal fees, and o Franchises & Licenses
filing fees.
o Goodwill
o Trademarks & Trade Names

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Types
Types of
of Intangibles
Intangibles
Patents
The exclusive right granted to its owner to
manufacture and sell a patented item or use a
process for 17 years. Patents are generally
amortized, using the straight-line method, over its
useful life not to exceed 17 years.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Types
Types of
of Intangibles
Intangibles
Patents
Matrix, Inc. purchased a patent for $10,000. The
patent is expected to have a useful life of 10 years.

Dec. 31 Amortization Expense - Patents 1,000

Accumulated Amortization - Patents 1,000
To amortize patent costs

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Type’
Type’ of
of Intangibles
Intangibles
Copyrights
The exclusive right to publish and sell a musical,
literary, or artistic work during the life of the
creator plus 70 years.

Leaseholds
The rights the lessor grants to the lessee under
the terms of a lease. Most leases have a
determinable life.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Types
Types of
of Intangibles
Intangibles
Leasehold Improvements
A lessee may pay for alternations or
improvements to the leased property such as
partitions, painting, and storefronts. These costs
are usually amortized over the term of the lease.
Franchises and Licenses
The right granted by a company or the
government to deliver a product or service under
specified conditions.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Types
Types of
of Intangibles
Intangibles
Trademarks and Trade Names
A symbol, name, phrase, or jingle identified with a
company, product, or service.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Goodwill
Goodwill

Goodwill
Occurs when one Only purchased
company buys goodwill is an
another company. intangible asset.

Goodwill is not amortized. It is tested

each year to determine if there has been
any impairment in carrying value.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 Total
Total Asset
Asset Turnover
Turnover
Total Asset Net Sales
Turnover = Average Total Assets

Provides
Provides information
information about
about aa company’s
company’s
efficiency
efficiency in
in using
using its
its assets.
assets.

Total Asset Turnover

2002 2001 2000 1999
Coors 1.25 1.44 1.52 1.49
Anheuser-Busch 0.97 0.95 0.97 0.94

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 End of Chapter 10

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005