Chapter 6 study guide
• Tangible Long-Term Assets
o Property, Plant, and Equipment – Sometimes called plant assets or fixed assets. We
depreciate these assets over their useful life.
o Natural Resources – Mineral deposits, oil and gas reserves, timber stands, coal mines,
and stone quarries are some examples of natural resources. We deplete these assets over
their useful life.
o Land – Has an infinite life and is not subject to depreciation.
• Intangible Assets
o Identifiable Useful Lives
♣ Patents and copyrights
• Copyrights- Protection of writings, musical composition, work of art, or other intellectual
property. The protection extends for the life of the creator plus 70 years.
o Indefinite Useful Lives
♣ Renewable franchises, trademarks, and goodwill.
♣ The cost of these assets is not expensed unless it can be shown that there has been an
impairment in value.
• Franchise – The exclusive right to sell products or perform services in certain geographic
areas.
• Goodwill- The excess of cost over fair value of net tangible assets acquired in a business
acquisition.
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• Cost pertaining to long term assets
o Buildings
♣ Purchase price, Sales taxes, Title search and transfer document costs, Realtor’s and
attorney’s fees, and Remodeling costs.
o Equipment
♣ Purchase price (less discounts), Sales taxes, Delivery costs, Installation costs, and Costs
to adapt to intended use.
o Land
♣ Purchase price, Sales taxes, Title search and transfer document costs, Realtor’s and
attorney’s fees, Costs of removal of old buildings, and Grading costs.
• A plant asset; also called property, plant, and equipment; is a long-term fixed asset that is
used to produce or sell products and services for the company. These assets are tangible
