Chapter 10

Fixed Assets and

Intangible Assets
Accounting, 21st Edition
Warren Reeve Fess

© Copyright 2004 South-Western, a division

of Thomson Learning. All rights reserved.
PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting
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Pengantar Akuntansi

AKTIVA TETAP
HARTA BERWUJUD YANG DIPEROLEH
UNTUK DIGUNAKAN DALAM KEGIATAN
OPERASIONAL DAN DAPAT DIGUNAKAN
BERULANG-ULANG SERTA UMURNYA LEBIH
DARI SATU TAHUN

III-2
Characteristic of Fixed Assets

Tangible

Long-term

owned and used

 Classifying Costs

umur > 1 th?

Yes No

Expense
Digunakan dalam
kegiatan Operasi?
Yes No

Fixed Assets Investment

 Land
• Purchase price
• Sales taxes
• Permits from government
agencies
• Broker’s commissions
• Title fees
• Surveying fees
 Land
• Purchase price
• • Delinquent real estate taxes
Sales taxes
• Permits• from
Razing or removing
government
agencies unwanted buildings, less the
• Broker’s salvage
commissions
• Grading and leveling
• Title fees
•
• SurveyingPaving a public street
fees
bordering the land
Buildings
 Architects’ fees
 Engineers’ fees
 Insurance costs incurred
during construction
 Interest on money
borrowed to finance
construction
 Walkways to and
around the building
Buildings
 Sales taxes
 Repairs (purchase of
existing building)
 Reconditioning
(purchase of an existing
building)
 Modifying for use
 Permits from
governmental agencies
 Land Improvements
• Trees and shrubs
• Fences
• Parking areas
• Outdoor lighting
• Concrete sewers and drainage
• Paved parking areas
Machinery and Equipment
• Sales taxes
• Freight
• Installation
• Repairs (purchase of used
equipment)
• Reconditioning (purchase
of used equipment)
Machinery and Equipment
• Insurance while in transit
• Assembly
• Modifying for use
• Testing for use
• Permits from
governmental agencies
Cost of Acquiring Fixed Assets Excludes:
 Vandalism
 Mistakes in installation
 Uninsured theft
 Damage during unpacking and installing
 Fines for not obtaining proper permits from
government agencies
 Perolehan Fixed Asset
• Purchase
• Trade in
• Donation
 Jurnal
Fixed Asset xxx
Cash/Acct Payable xxx

Fixed Assets xxx

Donated Capital xxx
DEPRECIATION OF
FIXED ASSETS
 Depreciation Expense Factors

Initial Cost - Residual Value = Depreciable Cost

Useful Life

1 2 3 4 5

Periodic Depreciation
Expense
 METODE PENYUSUTAN

1.Garis Lurus (Straight Line Method)

2.Saldo Menurun (Declining Balance
Method)
3.Jml Angka Tahun (Sum of The Year
Digit)
4.Jam Kerja Mesin (Machine Hours
Method)
5.Unit Produksi (unit of Production)

III-18
METODE PENYUSUTAN

Berdasarkan waktu :
Metode Garis lurus, saldo menurun
ganda, jumlah angka-angka tahun

Berdasarkan penggunaan :
Metode in put
Metode output

III-19
 Use of Depreciation Methods

Other Units-of-Production
5%
Declining- 4% 8%

Balance

83%

Straight-Line

Source: Accounting Trends & Techniques, 56th. ed., American Institute of

Certified Public Accountants, New York, 2002.
 Jurnal menyusutkan aktiva tetap

Tgl Account Debit Kredit

Beban Penyusutan $ ?
Jurnal
Akumulasi Penyusutan $ ?

Ada metode untuk menentukan

besarnyapenyusutan
 Facts

Original Cost.....………….. $24,000

Estimated Life in years….. 5 years
Estimated Life in hours….. 10,000
Estimated Residual Value... $2,000
 Straight-Line Method

Cost – estimated residual value

Estimated life
= Annual depreciation
 Straight-Line Method

$24,000 – $2,000
5 years
= $4,400 annual depreciation
 Straight-Line Rate

$24,000 – $2,000
= $4,400
5 years

$4,400
= 18.3%
$24,000
Straight-Line Method
The straight-line method is widely used
by firms because it is simple and it
provides a reasonable transfer of cost to
periodic expenses if the asset is used
about the same from period to period.
 Straight-Line Method
Accum. Depr. Book Value Depr. Book Value
at Beginning at Beginning Expense at End
Year Cost of Year of Year for Year of Year

1 $24,000 $24,000 $4,400 $19,600

2 24,000 $ 4,400 19,600 4,400 15,200
3 24,000 8,800 15,200 4,400 10,800
4 24,000 13,200 10,800 4,400 6,400
5 24,000 17,600 6,400 4,400 2,000

Cost ($24,000) – Residual Value ($2,000) Annual

= Depreciation
Estimated Useful Life (5 years) Expense ($4,400)
Declining-Balance Method

Step 1

Ignoring residual value,

determine the straight-line rate
100%
= x%
Usefull Life

100%
= 20%
5
Declining-Balance Method
There’s a shortcut. Simply
divide one by the number of
years (1 ÷ 5 = .20).
 Declining-Balance Method

Step 2

Double the straight-line rate.

.20 x 2 = .40
For the first year, the cost of the asset is
multiplied by 40 percent. After the first year,
the declining book value of the asset is
multiplied 40 percent.
Declining-Balance Method

Step 3

Build a table.
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600

$24,000 x .40
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760

$14,400 x .40
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760 15,360 8,640
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End

1 $24,000 40% $9,600 $9,600 $14,400

2 14,400 40% 5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
4 5,184 40% 2,074 20,890 3,110
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 STOP!
$24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
4 5,184 40% 2,074 20,890 3,110
5 3,110 40% 1,244 22,134 1,866
 Declining-Balance Method
If we
Book use this approach in Year
Value 5, we will
Accum.
end the year withAnnual
Beginning a book value of $1,866.
Deprec. Book Value
Year Remember,
of Year the residual
Rate Deprec. value at the end of
Year-End Year-End
1 Year 5 is40%
$24,000 expected to be $2,000,
$9,600 $9,600so we$14,400
2 14,400 must modify
40% our approach.
5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
4 5,184 40% 2,074 20,890 3,110
5 3,110 40% 1,244 22,134 1,866
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
4 5,184 40% 2,074 20,890 3,110
5 3,110 --- 1,110

$3,110 – $2,000
 Declining-Balance Method
Book Value Accum.
Beginning Annual Deprec. Book Value
Year of Year Rate Deprec. Year-End Year-End
1 $24,000 40% $9,600 $9,600 $14,400
2 14,400 40% 5,760 15,360 8,640
3 8,640 40% 3,456 18,816 5,184
4 5,184 40% 2,074 20,890 3,110
5 3,110 --- 1,110 22,000 2,000

Desired
ending book
value
Comparing Straight-Line With the
Declining-Balance Method
Straight-Line Declining-Balance
Method Method
5,000
Depreciation ($)

4,000

3,000

2,000

1,000

0 1 2 3 4 1 2 3 4
Life (years) Life (years)
Metode Jumlah angka-angka tahun
SUM OF THE YEARS DIGIT

Tahun penggunaan ke

3
(N + 1)
4 x N
2
5
(5 + 1)
x 5
15 2
 Metode Jumlah angka-angka tahun

Tahun penggunaan ke

2 Pembilang/sisa umur awal th

X ( Cost - Residu )
3 Penyebut

15
 METODE JUMLAH ANGKA-
ANGKA TAHUN
Dibeli mesin dengan cost Rp16.000.000 tunai. Mesin
ditaksir dapat digunakan 5 tahun dengan nilai residu
Rp.1.000.000. Mesin dibeli 1 Januari 2000

Th
Sisa
umur 1 5/15 ( 16.000.000 - 1.000.000) = 5.000.000
awal
tahun
2 4/15 ( 16.000.000 - 1.000.000) = 4.000.000

3 3/15 ( 16.000.000 - 1.000.000) = 3.000.000

4 2/15 ( 16.000.000 - 1.000.000) = 2.000.000

5 1/15 ( 16.000.000 - 1.000.000) = 1.000.000

15 15.000.000
 METODE JUMLAH ANGKA-ANGKA
TAHUN
Dibeli mesin dengan cost Rp16.000.000 tunai. Mesin
ditaksir dapat digunakan 5 tahun dengan nilai residu
Rp.1.000.000. Mesin dibeli 1 Oktober 2000

Th Perhitungannya Penyusutan

2000 3/12 x 5/15 ( 16.000.000 - 1.000.000) =1.250.000

9/12 x 5/15 ( 16.000.000 - 1.000.000) = 3.750.000

2001 4.750.000
3/12 x 4/15 ( 16.000.000 - 1.000.000) = 1.000.000

2002 9/12 x 4/15 ( 16.000.000 - 1.000.000)

3/12 x 3/15 ( 16.000.000 - 1.000.000)
 Machine Hours Method
Dibeli mesin dengan cost Rp16.000.000 tunai.
Mesin ditaksir dapat digunakan selama /berumur
100.000 jam dengan nilai residu Rp.1.000.000.
Tahun 2001 digunakan selama 5000 jam
a. Hitung tarip penyusutan 1 jam

= (Cost - Nilai residu ) : taksiran jam mesin

= (16.000.000 - 1.000.000 ) : 100.000 jam

= Rp.150 per jam

b. Hitung Penyusutan tahun 2001

= 5.000 x Rp.150
= Rp.750.000
Units-of-Production Method
(Metode Unit Produksi)
Cost – Estimasi Nilai Sisa
Estimasi Total Unit Produksi
= Beban Penyusutan per Unit
 Units-of-Production Method

$24,000 – $2,000
10,000 Unit
= Depreciation perper
= $2.20 unit, hour, etc.
unit
Units-of-Production Method
The units-of-production method
is more appropriate than the
straight-line method when the
amount of use of a fixed asset
varies from year to year.
 Revising Depreciation Estimates
Sebuah Mesin mempunyai
harga perolehan $130,000, Penyusutan
estimasi umur 30 th, nilai per-th:
residu $10,000. Penyusutan $130,000 – $10,000
menggunakan metode garis 30
lurus = $4,000
Revising Depreciation Estimates
Pada tahun ke-11 terdapat revisi atas estimasi
umur dan nilai residu
Accumulated
Equipment Depreciation
130,000 4,000
4,000
4,000
4,000
Book value = $90,000 4,000
4,000
4,000
4,000
Before revising 4,000
4,000
40,000
 Revising Depreciation Estimates
Pada th ke-11 terdapat perubahan estimasi sisa umur
mesin menjadi 25 years (estimasi sebelumnya tinggal
20 th) dan nilai residu menjadi $5,000.

Book value – revised residual value

Revised estimated remaining life
$90,000 – $5,000 revisi penyusutan/th
=
25 $3,400
Capital and Revenue Expenditures

Pengeluaran dalam rangka

memperoleh Aset
dikategorikan sebagai
capital expenditures.
 Capital and Revenue Expenditures
Pengeluaran untuk perbaikan dan
pemeliharaan Aset yang tidak
menambah umur dan meningkatkan
kapasitas dikategorikan sebagai
revenue expenditures.
Capital and Revenue Expenditures
EXPENDITURE
Revenue
Increases Expenditure
Increases (Debit expense
operating useful life
efficiency or adds No No account for
(extraordinary ordinary
to capacity? repairs)? maintenance
and repairs)
Yes Yes
Capital
Expenditure Capital Expenditure
(Debit fixed asset (Debit accumulated
account) depreciation account)
Capital and Revenue Expenditures
Capital and Revenue Expenditures
LIABILITIES

CAPITAL
ASSETS OWNER’S
EXPENDITURES EQUITY

net income
1. Initial cost
2. Additions EXPENSES REVENUES
3. Betterments
4. Extraordinary
repairs
Capital and Revenue Expenditures
LIABILITIES

ASSETS OWNER’S
EQUITY

net income

REVENUE EXPENSES REVENUES

EXPENDITURES

Normal and
ordinary repairs
and maintenance
Accounting for Fixed Asset Disposals
When fixed assets lose their usefulness they may be
disposed of in one of the following ways:
1. discarded,
2. sold, or
3. traded (exchanged)
Required entries will vary with type of disposition
and circumstances, but the following entries will
always be necessary:
An asset account must be credited to remove the asset
from the ledger, and the related Accumulated
Depreciation account must be debited to remove it’s
balance from the ledger.
Discarding Fixed Assets

A piece of equipment
acquired at a cost of
$25,000 is fully
depreciation. On
February 14, the
equipment is discarded.
 Discarding Fixed Assets

Feb. 14 Accumulated Depr.—Equipment 25 000 00

Equipment 25 000 00
To write off fully depreciated
equipment.
 Discarding Fixed Assets
Equipment costing $6,000 is depreciation at an
annual straight-line rate of 10%. After the
adjusting entry, Accumulated Depreciation—
Equipment had a $4,750 balance. The equipment
was discarded on March 24.
Mar. 24 Depreciation Expense.—Equipment 150 00
Accum. Depreciation—Equipment
150 00
To record current depreciation $600 x 3/12
on equipment discarded.
 Discarding Fixed Assets
Equipment costing $6,000 is depreciation at an
annual straight-line rate of 10%. After the
adjusting entry, Accumulated Depreciation—
Equipment had a $4,750 balance. The
equipment was discarded on March 24.

Mar. 24 Accumulated Depr.—Equipment 4 900 00

Loss on Disposal of Fixed Asset 1 100 00
Equipment 6 000 00
To write off equipment
discarded.
 Sale of Fixed Assets
When fixed assets are sold, the owner may
break even, sustain a loss, or realize a gain.
1. If the sale price is equal to book value, there will be no
gain or loss.
2. If the sale price is less than book value, there will be a
loss equal to the difference.
3. If the sale price is more than book value, there will be
a gain equal to the difference.

Gain or loss will be reported in the income

statement as Other Income or Other Loss.
 Sale of Fixed Assets
Equipment costing $10,000 is depreciated at an
annual straight-line rate of 10%. The
equipment is sold for cash on October 12.
Accumulated Depreciation (last adjusted
December 31) has a balance of $7,000.
Oct. 12 Depreciation Expense—Equipment 750 00
Accumulated Depr.—Equipment
750 00
To record current depreciation
$10,000 x ¾
on equipment sold.
x10%
 Sale of Fixed Assets
Assumption 1: The equipment is sold
for $2,250, so there is
no gain or loss.

Oct. 12 Cash 2 250 00

Accumulated Depr.—Equipment 7 750 00
Equipment
10 000equipment.
Sold 00
 Sale of Fixed Assets
Assumption 2: The equipment is sold
for $1,000, so there is a
loss of $1,250.

Oct. 12 Cash 1 000 00

Accumulated Depr.—Equipment 7 750 00
Loss on Disposal of Fixed Assets 1 250 00
Equipment
10 000equipment.
Sold 00
 Sale of Fixed Assets
Assumption 2: The equipment is sold
for $2,800, so there is a
gain of $550.

Oct. 12 Cash 2 800 00

Accumulated Depr.—Equipment 7 750 00
Equipment
10 000 00
Gain on Disposal of Fixed Assets
550
Sold00
equipment.
Pertukaran Aset tanpa subtansi
komersial
 Trade-in Allowance (TIA) – amount allowed
for old equipment toward the purchase price
of similar new assets.
 Boot – balance owed on new equipment
after trade-in allowance has been deducted.
 TIA > Book Value = Gain on Trade
 TIA < Book Value = Loss on Trade
 Gains are never recognized (not recorded).
 Losses must be recognized (recorded).
 Pertukaran Aset tanpa subtansi
komersial
List price of new equipment acquired $5,000
Cost of old equipment traded in $4,000
Accum. depreciation at date of exchange 3,200
Book value at date of exchange $ 800

CASE ONE (GAIN):

Trade-in allowance, $1,100
Cash paid, $3,900 ($5,000 – $1,100) Gains are not
TIA > Book Value = Gain recognized for
$1,100 – $800 = $300 financial reporting.
Boot + Book = Cost of New Equipment
$3,900 + $800 = $4,700
 Pertukaran Aset tanpa subtansi
komersial
On June 19, equipment exchanged
at a gain of $300.
June 19 Accumulated Depr.—Equipment 3 200 00
Equipment (new equipment) 4 700 00
Equipment (old equipment)
4 000 00
Cash
3 900 00
 Pertukaran Aset tanpa subtansi
komersial
List price of new equipment acquired $10,000
Cost of old equipment traded in $7,000
Accum. depreciation at date of exchange 4,600
Book value at date of exchange $2,400

CASE TWO (LOSS):

Trade-in allowance, $2,000
Cash paid, $8,000 ($10,000 – $2,000)
TIA<Book Value = Loss Losses are
$2,000 – $2,400 = $400 recognized for
financial reporting.
 Pertukaran Aset tanpa subtansi
komersial
On September 7, equipment
exchanged at a loss of $400.
Sept. 7 Accumulated Depr.—Equipment 4 600 00
Equipment (new equipment) 10 000 00
Loss on Disposal of Fixed Assets 400 00
Equipment (old equipment)
7 000 00
Cash
8 000 00
Natural Resources and
Depletion
Depletion is the process of
transferring the cost of natural
resources to an expense account.
 Natural Resources and Depletion

A business paid
$400,000 for the
mining rights to a
mineral deposit
estimated at 1,000,000
tons of ore. The
depletion rate is $0.40
per ton ($400,000 ÷
1,000,000 tons).
 Natural Resources and Depletion
During the current year, 90,000 tons are
mined. The periodic depletion is
$36,000 (90,000 tons x $0.40).

Adjusting Entry
Dec. 31 Depletion Expense 36 000 00
Accumulated Depletion
36 000 00
 Intangible Assets and Amortization
Amortization is the periodic cost expiration of intangible
assets which do not have physical attributes and are not
held for sale (patents, copyrights, and goodwill).

Date Description Debit Credit

Dec. 31 Amortization Expense 20,000
Patents 20,000

Paid $100,000 for patent rights. The patent life is 11

years and was issued 6 years prior to purchase.
11 years – 6 years = 5-year life
($100,000 / 5 years) = $20,000 per year
 Discovery Mining Co.
Partial Balance Sheet
December 31, 2006
Accum. Book
Property, plant, and equipment: Cost Depr. Value
Land $ 30,000 $ 30,000
Buildings 110,000 $ 26,000 84,000
Factory equipment 650,000 192,000 458,000
Office equipment 120,000 13,000 107,000
$910,000 $231,000 $ 679,000
Accum. Book
Mineral deposits: Cost Depr. Value
Alaska deposit $1,200,000 $ 800,000 $400,000
Wyoming deposit 750,000 200,000 550,000
$1,950,000 $1,000,000 950,000
Total property, plant, and equipment $1,629,000
Intangible assets:
Patents $ 75,000
Goodwill 50,000
Total intangible assets $ 125,000
Ratio of Fixed Assets to Long-Term Liabilities
Procter & Gamble (in millions)
2002 2001
Fixed assets (net) $13,349 $13,095
Long-term debt $11,201 $9,792
Ratio of fixed assets to
long-term liabilities 1.2 1.3
Use: To indicate the margin of safety
to long-term creditors
Chapter 10

The End
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