Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

Chapter Two
Accounting for Plant Assets

2.1 Nature of Plant Assets

Plant assets:
 Are Long lived assets usually more than a year
 Are Acquired for use in business operations i.e. must be capable of providing repeated use
or benefit
 Are not acquired for resale. Any asset that is acquired for resale purpose is not a plant
asset regardless of their durability, nature of the assets, and the length of time they are
held. Example land held for speculation purpose.
 Are subject to depreciation i.e. decline in usefulness through passage of time

2.2 Acquisition Cost of Plant Assets

The cost of a plant asset includes all expenditures that are reasonable and necessary for
getting the asset to the desired location and ready for use. They are:
 Purchase price  Special foundation
 Sales Tax  Insurance while the asset is in transit
 Installation Cost
For a newly purchased plant asset the acquisition cost may include:
 Purchase Price  Transportation Cost
 Sales Tax  Special Foundation
 Insurance  Installation Costs if it needs
For a second hand purchased plant asset, the acquisition cost may include:
 The agreed price  Cost of replacing parts
 Maintenance cost  Repairs and Painting costs
A. Costs of building-newly constructed building ,,,, ,qwkk.
 Fees paid to architects or designers
 For engineers for plans and supervision
 Insurance incurred during the construction
 Other costs like labor, materials and overhead costs
 Interest incurred during the construction on money borrowed

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
Cost of old Building Includes (Purchasing existing building):
 Agreed purchase price  Repair and maintenance costs
 Commission  Accrued tax on property… etc
 Sales taxes
 Permit from government
B. Cost of land
 Negotiated price or agreed purchase price
 Commission for Brokers
 Legal fees for title transfer and other expenditures for securing title
 Fees for Surveying, draining, clearing and grading or leveling the land
 The cost of removing unwanted building less any salvage recovered.
 Sales taxes... etc
Cost of land Improvement
 Cost of concert and drainage  Cost of Parking lots
 Cost of Fences  Cost of Trees and Shrubs…etc
C. Machinery and equipment
 Purchase price less cash discount, if  Insurance while in transit
any  Assembly costs
 Sales taxes  Modifying for use
 Fright costs  Testing for use
 Installation costs  Permits from governments…etc
 Repairs and maintenance costs
Costs of acquiring fixed assets excludes
 Vandalism
 Mistakes in installations
 Damage during unpacking and installation
 Damage due to employees carelessness or improper handling of an asset
 Fines for not obtaining proper permits from governments etc
Note: this all treated as expenses

2.3 Nature and Accounting for Depreciation

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
Plant asset is expected to have a lower value or no value when it is retired from the service.
This is because plant assets decline in usefulness through the time which we call it
depreciation. The difference between the initial cost and the value remaining when it is
retired (Residual Value or Scrape Value or Salvage Value or Trade in Value) is called
depreciable cost that should be allocated over the useful life of the assets as a depreciation
expense.

Depreciation is also the systematic allocation of the cost of a plant asset over its estimated
life. The causes of depreciation are divided into two broad classes:
1. Physical Usage (physical depreciation )- results from the wear and tear of plant assets due
to operating use and forces of nature such as earth quake, land slide, storm, etc
2. Functional (economic depreciation) – results from obsolescence and inadequacy
 Obsolescence – is the process of becoming out of date because of technological
innovation. Example:-type writing equipment
 Inadequacy – refers to the effect of growth and change in the scale of a business
operation. Inability to meet the demand of customers. Example small machines held by
large business.

Accounting for Depreciation

Factors that affect periodic depreciation expense are:-
 Initial cost or acquisition cost
 Residual value
 Useful life or estimated economic life and
 Method of depreciation
Methods of Depreciation
Usually the following 4 methods are used to allocate the depreciate cost. These are:
1. Straight line method 3. Sum of the year’s digit method and
2. Declining balance method 4. Units of production method

1. Straight Line Method (SLM)

This method allocates depreciable cost to each period of the Estimated Economic Life of the
assets equally. Depreciation per year is computed as follows:
 Depreciation per Year = (Acquisition Cost – Residua Value) / Estimated Economic Life

Illustration 2.1: assume that a machine is acquired at the beginning of 1991 for Br 100,000
and the residual value of the machine at the end of 10 years of economic life is estimated at Br
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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
10,000. Instruction: compute the amount of depreciation allocable to each year and present
the necessary adjustment at the end of each year.
Depreciation per Year = (Br 100,000– 10,000) / 10 Years = Br 90,000 / 10 = Br 9,000
Depreciation Expense 9,000

Accumulated Depreciation 9,000

2. Double Declining Balance Method

This method yields a decline in periodic depreciation charges over the estimated life of the
assets. The most common techniques are to double the straight line depreciation and multiply
the resulting rate to the cost of the asset less its accumulated depreciation.
Depreciation per year = (twice straight line method)*(Acquisition Cost–Accumulated
Depreciation)
Illustration 2.2: CC Corporation purchased equipment on January 1, 2000 for Br 20,000,
which has an expected life of 5 years and salvage value of Br 1,000.
Instruction: Calculate the declining balance rate and the amount of depreciation for its useful
life.
 Cost = Br 20,000
 EUL = 5 years
 Residual Value = Br 1,000
Year 2000 = 2(100%/5) * (Br 20,000 – 0) = Br 8,000
Year 2001 = 40% * (Br 20,000 – 8,000) = Br 4,800
Year 2002 = 40% * (Br 20,000 – 12,800) = Br 2,880
Year 2003 = 40% * (Br 20,000 – 15,680) = Br 1,728
Year 2004 = 40% * (Br 20,000 – 17,408) = Br 1,037
In the year 2004, the calculated amount of depreciation is Br 1037 but the actual depreciation
expense is Br 1,592 (Br 2,592 – 1000). The 2,592 is the difference between Br 20,000 (cost)
and 17,408 (accumulated depreciation). The estimated residual value does not enter into the
computation of depreciation expense until the very end. This is because this method provides
an automatic residual value. If an asset has a Residual Value, this depreciation method should
consider the stated residual value. Thus, in the above example the depreciation expense for
year 2004 is Br 1,592 rather than Br 1,037

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
3. The Sum Of Years Digits(SOYD) Method
Under this method the periodic charge for depreciation declines steadily or continuously over
the estimated life of the asset. Because successive small action is applied each year to the
original cost less estimated residual value. The following steps are followed to determine the
depreciation charge under this method:
 Estimate the useful life of the asset in the years
 Assign consecutive numbers for each year starting from 1
 Find the sum of these numbers using the following formula: SOYD = [N (N + 1)] / 2.
Where N = estimated useful life of the asset in years.
 Determine the numerator which is a number of the economic life of the asset remaining at
the beginning of each accounting period. Year 1= N, Year 2= N – 1, Year 3 = N – 2 , etc
 Compute depreciation using the formula: Annual Depre. = (Acquisition Cost – SV) * RY/
SOYD
Illustration 2.3: JK Company purchased old building on January 1, 1995 for Br 105,000 and
its estimated life is 4 years with a salvage value of Br 5,000 and the physical period ends on
December 31, 1995. Instruction: Determine the sum-of-years-digit and calculate the amount
of depreciation for its useful life. SOYD = [N (N + 1)]/ 2 = [4 (4 + 1)] / 2 = 10
Depreciation Expense for each year is:-
 1995 = 4/10 (105,000 – 5,000) = Br 40,000
 1996 = 3/10 (105,000 – 5,000) = Br 30,000
 1997 = 2/10 (105,000 – 5,000) = Br 20,000
 1998 = 1/10 (105,000 – 5,000) = Br 10,000
4. Units Of Production Method
This method yields a depreciation charge that varies with the amount of usage. To apply this
method the life of the asset is expressed in terms of production capacity such as machine
hours, miles, kilo meters, or number of units, etc. Under this method depreciation is
computed as follows:
 Depreciation Rate = (Acquisition Cost – SV) / Estimated Production Capacity
 Depreciation Expense = Depreciation Rate * Actual Usage of the Asset
Illustration 2.4: XY Company purchased diesel powered generator on January 1, 2000 at Br
50,000 and the generator has estimated economic life of 5 years or a production capacity of
500,000 machine hours with no residual value.
Instruction: calculate the depreciation expense for the year 2000 and 2001 assuming that the
generator was used for 100,000 and 120,000 machine hours, respectively.
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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
 Depreciation Rate = (Br 50,000 – 0) / 500,000 hours = Br 0.10 per hour
 Year 2000 depreciation expense = depreciation rate * actual usage
 Year 2000 depreciation expense = Br 0.10/ Hr. * 100,000 hours
 Year 2000 depreciation expense = Br 10,000
 Year 2001 depreciation expense = depreciation rate * actual usage
 Year 2001 depreciation expense = Br 0.10/ Hr. * 120,000 hours
 Year 2001 depreciation expense = Br 12,000

2.4 Partial Year Depreciation

To calculate the partial year depreciation, the following are important:
The date of purchase must be known. The number of days in the month in which the purchase
is made affects the depreciation expense in the following manner:
 If it is higher than 50% of the days in the month of purchase, compute depreciation for
the whole month
 If it is less than 50% of the days, ignore the whole month

Illustration 2.5: GG Company purchases a delivery truck on April 13, 1991 for Br 180,400.
The expected life of the truck was 4 years or 200,000 KMs and has an estimated salvage value
of Br 6,400. During the year 1991 and 1992 the truck was driven for 60,000 and 40,000 KMs,
respectively. The company’s fiscal period ends on December 31 of each year. Compute
depreciation expense for the year 1991 and 1992 under all the methods of depreciation.

A.Straight Line Method

 Annual Depreciation= (180,400 – 6,400)/4 =Br 43,500
 1991- Partial Year Depreciation= 9/12 * Br 43,500 = Br 32,625
 1992 Depreciation = 3/12 * Br 43,500 + 9/12 * Br 43,500 = Br 43500
B. Declining Balance Method
 Annual Depreciation, 1st Year = 2/4 (Br 180,400 – 0)=Br 90,200
 Annual Depreciation, 2nd Year = 2/4 (Br 180,400 – 90,200)=Br 45,100
 1991- Partial Year Depreciation= 9/12 * 90,200=Br 67,650
 1992 Depreciation = 3/12 * 90,200 + 9/12 * 45,100 = 22,550 + 33,825 = Br 56,375
C. SOYD Method
 SOYD = 4 (4 + 1)]/2= 10
 Annual Depreciation, 1st Year = 4/10 (Br 180,400 – 6,400)= Br 69,600
 Annual Depreciation, 2nd Year = 3/10 (Br 180,400 – 6,400)= Br 52,200

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
 1991- Partial Year Depreciation= 9/12* 69,600 = Br 52,200
 1992 Depreciation = 3/12 * 69,600 + 9/12 * 52,200= 17,400 + 39,150=Br 56,550
D. Units-of Production
 Depreciation Rate = (180,400 – 6,400) / 200,000KMs =Br 0.87/ km
 1991 Depreciation= 60,000 KMs * 0.87/km= Br 52,200
 1992 Depreciation= 40,000 KMs * 0.87/km = Br 34,800

2.5 Changes in Estimates and Revision of Periodic Depreciation

Residual value and estimated economic life are estimates. There may be an error in estimates.
Thus, estimates may be revised or changed. The change in estimates is applicable only to the
value or cost not depreciated so far ignoring the portion acquisition cost depreciated in the
previous accounting periods. Revision in estimates does not apply retroactively to the past
accounting periods.

Illustration 2.6: assume that on January 1, 1992 AA Company purchased a delivery truck for
Br 52,000. At the time of purchase the truck was estimated to last 5 years with salvage value
of Br 2,000 and it was depreciated accordingly on the straight-line method for two years and
at the beginning of the year 1994, the life was estimated to last 6 more years with a salvage
value of Br 2,600. Determine the revised annual depreciation per annum.
 Givens: cost Br 52,000  Depreciation/Year = (52,000 – 2,000) /
 Salvage value= Br 2,000 5
 EUL = 5 Years  Depreciation /Year = Br 10,000

Depreciation from 1992 to 1993

 Accumulated Depreciation = Br 10,000 * 2 years
 Accumulated Depreciation = Br 20,000
Revised Depreciation starting from 1994
 Revised Cost (Carrying Amount) = Br 52,000 – 20,000
 Revised Cost (Carrying Amount) =Br 32,000
 Revised EUL = 6 years
 Revised SV = Br 2,600
 Revised Depreciation = Br 32,000 – 2,600 / 6 = Br 29,400/6=Br 4,900

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

2.6 Capital and Revenue Expenditures

Capital expenditures are those expenditures incurred for acquiring plant asset or for addition
to such an asset and that will affect the utility of the plant asset for more than one accounting
period. Such expenditures are debited to the asset account or to the related accumulated
depreciation account. The common capital expenditures in addition to the initial cost includes
the following: Additions, Betterments and Extraordinary Repairs
Additions:
 Are those expenditures or costs increase the service potential of the plant asset
 They are debited to the plant asset account
 They would be depreciated over the estimated useful life of the additions
 Example: cost of adding an air conditioning system or an elevator to the building
Betterments:
Betterments are expenditures that increase operating efficiency or capacity for the remaining
useful life of the plant asset. These costs will be added to the plant asset account. Example:
substituting the old power point by a new power unit, substituting the old engine by new one
that improves operating efficiency.
Extraordinary repairs:
These expenditures increase the useful life of an asset beyond the original estimate. These
costs are debited to the appropriate accumulated depreciation account and the periodic
depreciation for the future period will be determined based on the revised book value.

Illustration 2.7: assume a delivery truck costing 190,000 has estimated economic life of 9
years with Br 10,000 residual value. It has been depreciated over the past 5 years on a
straight-line basis. At the beginning of year 6 the engine was changed as an extraordinary
repair at Br 40,000 which was expected to increase the estimated economic life the truck to 8
years with the same salvage value. Required: determine the annual depreciation charge for
the remaining life of the asset.
 Initial Cost: Br 190,000
 Residual value: Br 10,000
 Estimated Economic Life: 9 years
 Annual Depreciation: Br 190,000 – 10,000/ 9 years =Br 20,000
 Accumulated Depreciation: Br 20,000 * 5 years =Br 100,000

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

Extraordinary Repairs: - it is debited to accumulated depreciation account

Accumulated Depreciation……………………… 40,000
Cash……………………………………………… ……………………… 40,000
After extraordinary repairs:
 Cost ............................................................................................Br 190,000
 Accumulated Depreciation............................................... (60,000)
 Book Value............................................................................... Br 130,000
 Annual Depreciation= (130,000 – 10,000) / 8=..... Br 15,000
Revenue Expenditure: these are expenditures for ordinary maintenance and repairing of a
recurring nature should be classified as revenue expenditure and debited to expense
accounts.
Example, cost of repairing a building, a truck, etc

2.7 Disposal of Plant Assets

When an asset is no longer useful to the business, it is retired from the service. This is called
disposal. Disposal refers to discarding, selling, or exchanging plant assets.
To journalize the necessary entries on the date of disposal, the following information are
required
 The up-to-date balance of the accumulated depreciation account
 The book value of the asset
 The loss or gain on disposal

1. Discarding Plant Assets

When a plant asset are no longer useful to the business and has no market or sales value, they are
discarded.
Illustration 1: RR Company discarded machinery on December 31, 2017, which was fully
depreciated. The machine was acquired at a cost of Br 150,000 before six years.
 BV = Asset cost – Accumulated Depreciation
 BV = Br 150,000 – 150,000 = 0
The Accounting Entry for this disposal:-
Accumulated Depreciation……………………………………. 150,000
Machinery……………………………………………… ………… 150,000

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets
Illustration 2: RR Company discarded equipment, which was purchased at a cost of Br
32,000, after it has been depreciated for 4.5 years under the straight-line method with a
consideration of Br 2,000 salvage value. The estimated economic life of the asset was 5 years.
Journalize the necessary transaction:
 Annual Depreciation = Br 32,000 – 2,000/ 5
 Annual Depreciation = Br 6,000
 Accumulated Depreciation = Br 6,000 * 4.5 years
 Accumulated Depreciation = Br 27,000
 Book Value = Br 32,000 – 27,000=Br 5,000
The loss on disposal is Br 5,000 as the business discards an asset with a value of Br 5,000.
The Accounting Entry for this disposal:
Accumulated Depreciation ………………………. 27,00
0
Loss on 5,000
Disposal……………………………………….
Equipment…………………………………… 32,000

2. Selling Old Plant Asset

The entry to record the sale of a plant asset is like the entry of discarding a plant asset except
that the cash or other asset to be received must be accounted for.
 If the selling price > book value, there will be a gain on disposal
 If the selling price < book value, there will be a loss on disposal

Illustration 3: RA Furniture Company purchased a computer system for Br 34,000 and the
system was expected to last 8 years with a salvage value of Br 2,000. The equipment was
depreciated for 6 years based on the straight-line method and sold at the beginning of the 7 th
year.
Required: Journalize the necessary entries assuming that the asset was sold for:
A) Br 15,000 B) Br 10,000 C) Br 9,000
Acquisition Cost = Br 34,000 Accumulated Depreciation = Br 4,000 * 6
Residual Value = Br 2,000 Years
Estimated Economic Life = 8 years Accumulated Depreciation = Br 24,000
Annual Depreciation = Br 34,000 – 2,000/ 8 Book Value = Br 34,000 – 24,000 = Br 10,000
Annual Depreciation = Br 4,000

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

A. Br 15,000 disposal price implies a gain of Br 5,000

Accumulated Depreciation…………………………… 24,000

Cash 15,000
Equipment 34,000
Gain on Disposal 5,000
B. Br 10,000 disposal price implies is neither gain nor loss
Accumulated Depreciation 24,000
Cash 10,000
Equipment 34,000

C. Br 9,000 disposal price a loss of Br 1,000

Accumulated Depreciation 24,000
Cash 9,000
Loss on Disposal 1,000
Equipment 34,000

3. Exchanging or Trading in
Old plant assets are often traded in for new plant asset having similar use or dissimilar use.
 Under this situation, a trade-in allowance (TIA) is usually granted on old plant asset.
 The trade-in allowance can be considered an agreed selling price for the old asset.
 This amount is deducted from price of new asset as consideration for old plant asset.
 The balance paid to the seller of the new asset after the trade-in allowance is
deducted from the purchase price is called Boots.
 The GAIN or LOSS on exchange is determined by comparing the TIA and the Book
Value of the old Asset:
 If the TIA > book value, there will be a gain on disposal
 If the TIA < book value, there will be a loss on disposal
 If the TIA=book value, there is neither a gain nor a loss
According to GAAP on exchange of similar plant assets, loss should be recognized and gain
should be adjusted to the price of the new asset. That is, the new asset exchanged must be
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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

recorded at the book value of the old asset plus the cash paid (Boots) or the purchase price
which ever is lower.
Illustration 4: BB Company acquired a machine at Br 80,000 by trading in a similar old
asset that has a cost of Br 75,000 and up-to-date accumulated depreciation account balance
of this asset was Br 72,000. Make the necessary journal entries if the TIA was:
A. Br 4,000 B) Br 3,000 C) Br 2,000
Book Value = Br 75,000 – 72,000 = Br 3,000
A. TIA=Br 4,000
 If the TIA is Br 4,000, there is a gain of Br 1,000. But the gain will not be recognized
 Boots = Br 80,000 – 4,000 = Br 76,000
 Purchase Price = Br 80,000
 Boots + Book Value = Br 76,000 + 3,000 = Br 79,000. Thus, the new machine should be
recorded at Br 79,000 because the lower is this amount
Machinery (New) 79,000
Accumulated Depreciation 72,000
Cash 76,000
Machinery (Old) 75,000

B. TIA=Br 3,000
 If the TIA is Br 3,000, there is neither a gain nor a loss
 Boots = Br 80,000 – 3,000 = Br 77,000
 Purchase Price = Br 80,000
 Boots + Book Value = Br 77,000 + 3,000 = Br 80,000. Thus, the new machine should be
recorded at Br 80,000 because boots plus book value and purchase price are the same.
Machinery (New) 80,000
Accumulated Depreciation 72,000

Cash 77,000
Machinery (Old) 75,000
C. TIA=Br 2,000

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

 If the TIA is Br 2,000, there is a loss of Br 1,000. This loss is recorded in the accounting
records of the period.
 Boots = Br 80,000 – 2,000 = Br 78,000
 Purchase Price = Br 80,000
 Boots + Book Value = Br 78,000 + 3,000 = Br 81,000. Thus, the new machine should be
recorded at Br 80,000 since the purchase price is the lower amount.
Machinery (New) 80,000
Accumulated Depreciation 72,000
Loss on Exchange 1,000
Cash 78,000
Machinery (Old) 75,000
Note: In the case of Exchange of dissimilar plant asset, both loss and gain should be
recognized.
2.8 Accounting for Natural Resources and Depletion
 Natural resources include forests, water, minerals, metal ores, oil, gas, etc.
 The costs of natural resources include all the normal, necessary and reasonable
expenditure incurred to acquire these natural resources.
 The periodic cost allocation of the natural resources is called depletion.
To compute depletion the steps are as follows:
 Depletion Rate = (Cost – the estimated SV) / Estimated Deposit
 Depletion Expense= Depletion Rate * Extracted Deposit
Illustration 5: MIDROC Gold Mining Company pays Br 4,500,000 to acquire its mineral site
which is believed to contain 500,000 tons of Gold ores. The Residual Value is estimated to
be Br 500,000. If 12,000 tons are extracted during the year, compute the depletion rate and
depletion expense.
 Depletion Rate = (4,500,000 – 500,000) / 500,000 tons = Br 8 per ton
 Depletion Expense = Br 8 / ton * 12,000 tons = Br 96,000
The Accounting Entry would be:
Depletion Expense 96,000
Accumulated Depletion 96,000

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

2.9 Accounting for Intangible Assets and Amortization

For accounting purposes intangible assets include patents, copy rights, trademarks, trade
names, and goodwill etc. the basic principles of accounting for intangible asset are the
determination of the acquisition costs and the recognition of periodic cost expiration which
is called amortization.
A. Patents: patent are exclusive right to produce and sell goods with one or more unique
features. In USA, Patents have the legal life of 17 years, which is given by the government.
 Cost of Patent Right – the cost of patent right includes the purchase price plus related
costs.
 Amortization of Patent Right: patents have a legally granted period of 17 years.
However, it may lose their usefulness in a period less than 17 years. Thus,
amortization of patent should be computed by comparing the legal life and the
estimated life and by taking the lower of the two.
Illustration 6: a patent is purchased for Br 100,000 after 6 years its legal life has been
expired. The patent has an estimated useful life of 10 years.
Instruction: compute the amortization expense and make the necessary journal entry.
Note: amortization expense calculated based on straight-line method.
 The remaining legal life = 17 – 6 = 11 years
 The estimated useful life = 10 years
 The lower is the estimated useful life = 10 years
 Amortization Expense = Cost / Estimated Useful life
 Amortization Expense = Br 100,000 / 10 years = Br 10,000
The Accounting Entry is:
Amortization Expense 10,000

Patent or Accumulated Amortization-Patent 10,000

B. Copy right is an exclusive right granted by the government to protect the production
and sale of literary or artistic materials for the life of the creator plus 50 years. The cost of
copy right include all costs of creating the work plus the cost of obtaining the right.
C. Goodwill- is an intangible asset that is attached to a business because of such favorable factors
as location, product superiority, reputation, managerial skill, etc. Goodwill is recorded normally

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 Chapter 2: Accounting for Plant Assets, Natural Resources, and Intangible Assets

when it is purchased from others. In addition, there is no legal life for goodwill, however, it should
be amortized over its useful life or 40 years whichever is the lower. The existence of goodwill is
evidenced by customers’ willingness to pay high price and high return on investment. Note:
Goodwill is no more amortized as of June 30, 2001. FASB changed the rule of goodwill amortization.
Instead, purchased goodwill will remain on the balance sheet as an asset and then Impairment
Tests should be made periodically.

2.10 Presentation of Plant Assets, Natural Resource and Intangible

Assets on the Financial Statements
Plant assets and natural resources are reported with the related accumulated depreciation and
accumulated depletion on the financial statement. Where as intangible assets may be reported net
of the related accumulated amortization or with accumulated amortization

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