2. Natural Resources Cost – Salvage value Total estimated units recoverable = Depletion rate per unit of resource × Number of units extracted and sold this period = Periodic Depletion Expense (Identical to “Units of Production” Depreciation)

3. Natural Resources Martin Mining Company paid $10,000,000 cash to purchase land that is expected to yield 5,000,000 tons of coal. After all coal is extracted the land is not expected to have any salvage value. During 2006, the company extracted and sold 500,000 tons of coal. $10,000,000 – $0 5,000,000 tons =$2.00 per ton extracted and sold

4. Natural Resources Martin Mining Company paid $10,000,000 cash to purchase land that is expected to yield 5,000,000 tons of coal. After all coal is extracted the land is not expected to have any salvage value. During 2006, the company extracted and sold 500,000 tons of coal.

5. Intangible Assets (Indefinite lives) Trademarks A name or symbol that identifies a company or a product. The ‘cost’ of a trademark may include design, purchase, or defense of the trademark. (What about the ‘value’ of the trademark Coca Cola?) Trademarks A name or symbol that identifies a company or a product. The ‘cost’ of a trademark may include design, purchase, or defense of the trademark. (What about the ‘value’ of the trademark Coca Cola?) Goodwill Goodwill The excess of cost over fair value of net tangible assets acquired in a business acquisition.

6. Intangible Assets Goodwill The excess of cost over fair value of net tangible assets acquired in a business acquisition. Assume that your company is willing to pay $450,000 cash to acquire Seller Company. Let’s look at the accounting.

7. Goodwill.

9. Impairment of Intangible Asset Intangible assets with indefinite useful lives must be tested for impairment annually. If the fair value of the intangible asset is less than its book value, an impairment loss is recognized. Assume that at the end of 2006, we determine that goodwill has suffered a $10,000 impairment in value. (AOL/Time Warner = $54 BILLION Loss from Goodwill Impairment)

10. Intangible Assets (Definitive lives) Patents The exclusive legal right to produce and sell a product that has one or more unique features. The legal life of a patent is 20 years. Franchise The exclusive right to sell products or perform services in certain geographic areas for a certain fixed period of time.

11. Expensing Intangible Assets An intangible asset with a definitive useful life is amortized using the straight-line method over the intangible’s legal life or its useful life. Assume we purchased a patent that has a 20-year legal and useful life for $20,000 cash.

12. Balance Sheet Presentation

13. Class Assignment Questions Questions 4, 7, 10, 13, 14, 16, 19, 20 and 22 (Page 431 in textbook)

14. Chapter 9 The End