1. Unit 13
Long-Term Assets

2. LONG TERM ASSETS TANGIBLE INTANGIBLE Buildings IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
Franchises, Goodwill, etc.
Land

3. LONG TERM ASSETS TANGIBLE INTANGIBLE Buildings IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
Franchises, Goodwill, etc.
Land

6. BASKET PURCHASE
FACTORY

7. LONG TERM ASSETS TANGIBLE INTANGIBLE Buildings IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
Franchises, Goodwill, etc.
Land

8. BASKET PURCHASE
$650,000

9. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
TANGIBLE
INTANGIBLE
DEPRECIATION
AMORTIZATION
Buildings
IDENTIFIABLE LIFESPAN
Plant, Property, Equipment
Copyrights, Patents, etc.
(PPE)
Furniture and Fixtures
INDETERMINATE LIFESPAN
Brands, Trademarks
Natural Resources
DEPLETION
Franchises, Goodwill, etc.
IMPAIRMENT
Land

10. LONG TERM ASSETS
DEPRECIATION
AMORTIZATION
DEPLETION
IMPAIRMENT

11. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
EXPENSE
EXPENSE
ACCUMULATED DEPRECIATION
ACCUMULATED AMORTIZATION
DEPLETION
IMPAIRMENT
EXPENSE
LOSS
ACCUMULATED DEPLETION
ASSET

12. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

13. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
ACCELERATED METHODS
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

14. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

15. Straight-Line Depreciation
Acquisition Cost
$17,000
Depreciable Amount
Estimated Useful Life: FOUR YEARS
$12,000
“Every penny it takes to get the machine purchased, delivered, put in place, installed, connected, set up, configured, programmed, and READY TO USE”
$17, $5,000
Estimated Salvage Value
$5,000

16. Straight-Line Depreciation
Acquisition Cost
$17,000
25%
Depreciable Amount
25%
Estimated Useful Life: FOUR YEARS
$12,000
1 / 4 = 25%
25%
25%
Estimated Salvage Value
$5,000

17. Straight-Line Depreciation
Acquisition Cost
$17,000
25%
$-3,000
$-3,000
Depreciable Amount
25%
Estimated Useful Life: FOUR YEARS
$12,000
1 / 4 = 25%
25%
$-3,000
25%
$-3,000
Estimated Salvage Value
$5,000

18. Double Declining Balance Depreciation
Acquisition Cost
$17,000
Estimated Useful Life: FOUR YEARS
“Every penny it takes to get the machine purchased, delivered, put in place, installed, connected, set up, configured, programmed, and READY TO USE”
Estimated Salvage Value
$5,000

19. Double Declining Balance Depreciation
Acquisition Cost
$17,000
Estimated Useful Life: FOUR YEARS
1 / 4 = 25%
50%
of NET BOOK VALUE
Estimated Salvage Value
$5,000

20. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
50%
of NET BOOK VALUE
$8,500
Estimated Salvage Value
$5,000

21. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
$8,500
50%
of NET BOOK VALUE
$4,250
Estimated Salvage Value
$5,000

22. depreciate past the Salvage Value!
You NEVER
depreciate past the Salvage Value!

23. Double Declining Balance Depreciation
Acquisition Cost
$17,000
$-8,500
Estimated Useful Life: FOUR YEARS
$8,500
50%
$-3,500
of NET BOOK VALUE
$4,250
Estimated Salvage Value
$5,000

24. Fleet of 40 carts for use in factory
Each cart cost $10,000
Estimated useful life of 10 years
Salvage value of $25,000

25. Units of Production Depreciation
Acquisition Cost
$300,000
$-33,500
Year 1:
67,000 pieces stamped
Depreciable Amount
$250,000
$250,000
$33,500
Estimated Useful Life: 500,000 pieces
$0.50 per piece stamped
Estimated Salvage Value
$50,000

27. depreciate past the Salvage Value!
You NEVER
depreciate past the Salvage Value!

28. Units of Production Depreciation
Acquisition Cost
$300,000
$-33,500
Depreciable Amount
$250,000
$250,000
$33,500
Estimated Salvage Value
$50,000

30. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Sum-of-the-years Digits method
MACRS method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

31. LONG TERM ASSETS
DEPRECIATION
AMORTIZATION
DEPLETION
IMPAIRMENT

32. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
Straight-Line method
Double Declining-Balance method
Straight-Line method
Units-of-Production Method
DEPLETION
IMPAIRMENT
Units-of-Production Method
Direct Write-Down as needed

33. LONG TERM ASSETS DEPRECIATION AMORTIZATION DEPLETION IMPAIRMENT
EXPENSE
EXPENSE
ACCUMULATED DEPRECIATION
ACCUMULATED AMORTIZATION
DEPLETION
IMPAIRMENT
EXPENSE
LOSS
ACCUMULATED DEPLETION
ASSET

34. DISPOSAL OF LONG-TERM ASSETS
Cash
Sell this equipment for $25,000 cash
25,000
Accumulated Depreciation
Equipment
50,000
31,000
50,000
31,000

35. DISPOSAL OF LONG-TERM ASSETS
Cash
Sell this equipment for $25,000 cash
25,000
Accumulated Depreciation
GAIN on disposal
6,000
Equipment
50,000
31,000
50,000
31,000

36. Additional things to know
Salvage Value and Useful Life are estimates
As estimates are revised over time, you can re-do your depreciation method beginning at the period you revise your estimates.

37. Additional things to know
You stop depreciating once Net Book Value reaches present salvage value.
You never depreciate past the current salvage value.
A sudden and permanent drop in market value results in an immediate Impairment write-down.
The Net Book Value of an asset never increases, even if the market value increases.

38. Additional things to know
Companies can choose their depreciation method.
Companies can use different methods for different assets.
Once a method is chosen for an asset, you must use that method consistently.

39. Additional things to know
The Tax Expense on the Balance Sheet is calculated as though the tax return used the Balance Sheet method.
The IRS requires that MACRS be used on the Income tax returns
Thus, the difference between what companies EXPENSE on the Income Statement, and the amount they actually pay the IRS for that period is kept in an account called “Deferred Taxes” on the balance sheet.