Tangible and Intangible Assets

actual and intangible summation Assets Jennifer Geolfos July 19, 2012 ACC291 Mary Larsen Tangible and Intangible Assets Tangible and intangible assets embroil everything listed below essence assets on the balance sheet. Assets lie in of resources a business owns, (Kimmel, Weygandt, & Kieso, 2010, p. 12). Tangible assets would include land, land improvements, buildings, and equipment. These types of asset would be class as fixed assets. Intangible assets atomic number 18 rights, privileges, and competitive advantages that result from the ownership of persistent assets that do non possess physiological substance, (Kimmel, Weygandt, & Kieso, 2010, p. 414). Types of intangible assets include patents, copyrights, trademarks, franchises, licenses, and goodwill. These assets would be assort as long-lived assets. derogation derogation is the growth of allocating to expense the follow of a plant asset over its utilitarian (service) disembodied spirit in a sane and systemat ic manner, (Kimmel, Weygandt, & Kieso, 2010, p. 02). Depreciable assets include land improvements, buildings, and equipment because the expediency of the asset simplifications over its useful conduct. lays usefulness remains aeonian over its useful life and is not considered a depreciable asset. A depreciable asset excessively can be considered obsolete when it becomes outdated before it physically wears out. Computing depreciation involves terms, useful life, and salvage respect. Cost is the current assets prise. Useful life is the expected productive life of the asset to the owner.Salvage place is the assets measure at the end of the useful life. Depreciation is usually computed using the straight-line method, the declining-balance method, or the units-of-activity method. Straight-line is the closely widely used method in the United States. Under the straight-line method, companies expense an tally hail of depreciation each form of the assets useful life, (Kimmel , Weygandt, & Kieso, 2010, p. 441). To record the depreciation on the sale of a depreciable asset, a comp any(prenominal) increases Depreciation Expense, and decreases collect Depreciation.Declining-balance method uses a declining book value figured over periodic depreciation and is also call an accelerated-depreciation method because the set-back years of an assets life produces higher depreciation in equality to straight-line method. The units-of-activity method takes the useful life in position of total production units or expected use of the asset. This method is typically used for factory machinery or preservation equipment in terms of hours used. The total amount of depreciation is the same no social function which depreciation method is used. amortization The process of allocating the equal of intangibles is referred to as amortization, (Kimmel, Weygandt, & Kieso, 2010, p. 414). To record amortization of an intangible asset, a confederacy increases (debits) Amortizatio n Expense, and decreases (credits) the specific intangible asset, (Kimmel, Weygandt, & Kieso, 2010, p. 415). Companies amortize intangible assets over their useful life or legal life, whichever is shorter. This life is never allowed to hand 40 years, (Investing Answers, 2001-2012). The initial cost of any intangible asset is the stand in or cash equivalent worth paid to obtain the asset.The company adds any legal fees, acquisition fees, and registration fees to narrow the amount to be amortized for that asset. This applies to patents, copyrights, trademarks, franchises, and licenses. Goodwill value is determined by the excess cost over fair market value of the net asset purchased. Acquisition and disposition Acquisition and disposal of tangible assets refers to the purchasing and selling of land, buildings, and equipment. Acquisition requires determining the initial cost to add the asset to the companys financial records.The entry would be an increase (debit) to the asset (E quipment) and a decrease (credit) to cash or increase (credit) to accounts payable. Companies stir of a fixed asset by retirement (scrap or discard), sale, or exchange (trade-in). Book value is determined by deducting the accumulated depreciation to date from the initial cost of the asset. The book value is past eliminated by (1) debiting (decreasing) Accumulated Depreciation for the total depreciation to date, and (2) crediting (decreasing) the asset account for the cost of the asset, (Kimmel, Weygandt, & Kieso, 2010, p. 10). Conclusion Tangible and intangible assets and the tools to get away each type of asset are important to understand for the financial statements. for each one type of asset has its own devices that essential be used to represent the discriminate aspects of the asset. Using these tools will create financial statements that show the assets accurately and factually. References Weygandt, J. J. , Kimmel, P. E. , & Kieso, D. E. (2010). Financial news report (7 th ed. ). Hoboken, NJ John Wiles and Sons. Investing Answers. (2001-2012). Retrieved from http//www. investinganswers. com