Intangible Assets

What Are Intangible Assets? – Definition Intangible assets are those assets which have no physical substance but have future economic benefits based on rights or benefits accruing to the asset’s owner. Explanation Intangible assets are noncurrent assets that have no physical properties. They generate revenues because they offer a firm value in future revenue production or exchange because of the r…

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Annuity Method of Assets Depreciation

Definition In the annuity method of assets depreciation, it is supposed that the money invested in the purchase of the asset earns interest at a fixed rate. This is debited to the asset account and, according to the annuity table, a certain fixed amount of depreciation is charged everywhere for the estimated useful life of the asset. Explanation The amount of depreciation calculated by the annuity…

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Assets

The learning objectives in this article are to consider: What are assets in accounting? Types of assets Classification of assets Assets: Definition Assets are the properties, things, and receivables with certain values that are owned by a business. Examples Examples of assets include cash, debtors, stock, accounts receivable, prepaid expenses, land, buildings, plant, machinery, vehicles, furniture…

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Operating Assets

Operating Assets: Definition The term operating assets is used to identify the broad category of long-lived assets that are used to produce goods or services. This group includes not only tangible assets (often known as property, plant, equipment, or fixed assets) but also those that exist only as intangible rights (such as trademarks, patents, and goodwill). The category excludes assets that are…

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Accounting for Asset Exchange

A summary of the process used to account for asset exchange is given below. Cost of New Asset The recorded cost of the new asset cannot exceed the fair value of the new asset. Cash given Fair value of old asset plus cash. Lower of book value of old asset plus cash or fair value of old asset plus cash. Cash received Fair value of old asset less cash. Lower of allocated book value of old asset or fa…

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Exchange of Similar Nonmonetary Operating Assets

Although some accountants argue that exchanges of similar assets should be treated the same as exchanges of dissimilar ones, the generally accepted accounting principles (GAAP) treat these transactions as being substantively different. That is to say, the exchange is viewed as a restructuring of the firm’s productive capacity rather than a disposal and acquisition. Consequently, the GAAP prescribe…

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Exchange of Dissimilar Nonmonetary Assets

Definition and Explanation When an asset of one kind is exchanged for an asset of another kind, the preferred measurement of the new asset’s cost is the fair value of the asset given up. The simplest example of this type of exchange is a purchase for cash. The journal entry is straightforward, as seen for this $100,000 acquisition: Noncash transactions are more difficult to account for. The practi…

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Identifiable and Unidentifiable Intangible Assets

Identifiable Intangible Assets Definition Identifiable intangible assets are assets that are derived from a specific right or ability. Most of these assets are created by registration with a government authority or by contract. Types of Identifiable Intangible Assets Some major types of identifiable intangible assets are listed below. Patent: Unique right to manufacture a product or to use a proce…

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Costs Subsequent to Acquisition

Most operating assets require expenditures for repairs, maintenance, or improvements. These subsequent costs can pose accounting problems if they are material in amount or significantly affect the asset’s service life. In general terms, an accountant must choose between capitalizing the expenditure by increasing the asset’s book value or expensing it in the year in which it occurs. Conceptually, t…

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Acquisition of Multiple Assets Together

Definition and Explanation Since almost every type of asset can be viewed as a set of components, there are very few situations in which a single asset is acquired. In many (if not most) cases, this fact is ignored because the components are either permanently joined together, share the same useful life, or information about the separate components is not relevant. However, in other cases, it may…

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