Reporting and Analyzing Long-Lived Assets

Journal Entries for sale of plant assets:

Transaction DescriptionJournal Entry

Account Title Debit CreditAdjusting Entry to bring accumulated depreciation to current date

Depreciation Expense XXXAccumulated Depreciation-asset title XXX

To record the sale of an asset with a gain

Accumulated Depreciation—asset title XXXCash XXX

Asset Title XXXGain on Disposal XXX

To record the sale of an asset with a loss

Accumulated Depreciation-asset title XXXCash XXXLoss on Disposal XXX

Asset Title XXX

To record the retirement of an asset where the asset is fully depreciated

Accumulated Depreciation—asset title XXXAsset Title XXX

To record the retirement of an asset where there is either a salvage value or the asset has not been fully depreciated

Accumulated Depreciation—asset title XXXLoss on disposal XXX

Asset Title XXXNote: “Asset title” should be replaced with the title of the asset. Depreciation must always be brought up to current before an asset is disposed of during the year.

Journal Entries for Purchase of Intangible Assets:

Transaction DescriptionJournal Entry

Account Title Debit Credit

To record the purchase of a patentPatent XXX

Cash XXX

To record the purchase of a FranchiseFranchise XXX

Cash XXX

To record the purchase of a CopyrightCopyright XXX

Cash XXX

To record the purchase of a Trademark or Trade name

Trademark XXXCash XXX

To record research and development cost

Research and Development Expense XXXCash XXX

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Reporting and Analyzing Long-Lived Assets

Journal Entries for Purchase of Intangible Assets Continued:

Transaction DescriptionJournal Entry

Account Title Debit Credit

To record the acquisition of goodwillGoodwill XXX

Cash XXXResearch and development cost are to be treated not as an intangible asset but only as an expense.

Journal Entries for Amortization of Intangible Assets:

Transaction DescriptionJournal Entry

Account Title Debit CreditTo record the amortization of a patent Amortization Expense—Patent XXX

Patent XXX

To record the amortization of a Franchise

Amortization Expense—Franchise XXXFranchise XXX

To record the amortization of a Copyright

Amortization Expense—Copyright XXXCopyright XXX

To record the amortization of a Trademark or Trade Name

Amortization Expense—Trademark XXXTrademark XXX

To record impairment of Goodwill Loss Impairment—Goodwill XXXGoodwill XXX

Note: Research and development costs are an expense; therefore, those costs cannot be amortized. Goodwill will only be decreased for any impairment to its market value. Goodwill will never be increased in value due to an increase in its market value.

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