CHAPTER 10 FIXED ASSETS AND INTANGIBLE ASSETS DISCUSSION QUESTIONS a b Real estate acquired as speculation should be listed in the balance sheet under the caption “Investments,” below the Current Assets section $1,100,000 Capital expenditures include the cost of acquiring fixed assets and the cost of improving an asset These costs are recorded by increasing (debiting) a fixed asset account Capital expenditures also include the costs of extraordinary repairs, which are recorded by decreasing (debiting) the asset’s accumulated depreciation account Revenue expenditures are recorded as expenses and are costs that benefit only the current period and are incurred for normal maintenance and repairs of fixed assets Capital expenditure 12 years a b No No a An accelerated depreciation method is most appropriate for situations in which the decline in productivity or earning power of the asset is proportionately greater in the early years of use than in later years, and the repairs tend to increase with the age of the asset b An accelerated depreciation method reduces income tax payable to the IRS in the earlier periods of an asset’s life Thus, cash is freed up in the earlier periods to be used for other business purposes c MACRS was enacted by the Tax Reform Act of 1986 It is used for depreciation for fixed assets acquired after 1986 a No, the accumulated depreciation for an asset cannot exceed the cost of the asset To so would create a negative book value, which is meaningless b The cost and accumulated depreciation should be removed from the accounts when the asset is no longer useful and is removed from service Presumably, the asset will then be sold, traded in, or discarded 10 a b c Property, plant, and equipment or Fixed assets Current assets (merchandise inventory) Over the shorter of its legal life or years of usefulness Expense as incurred Goodwill should not be amortized, but written down when impaired 10-1 © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part CHAPTER 10 Fixed Assets and Intangible Assets PRACTICE EXERCISES PE 10–1A Aug Delivery Truck Cash Repairs and Maintenance Expense Cash 1,675 1,675 40 40 PE 10–1B Feb 14 Accumulated Depreciation—Delivery Van Cash 14 Delivery Van Cash PE 10–2A a b c $415,000 ($440,000 – $25,000) 12.5% = (1/8) $51,875 ($415,000 × 12.5%), or ($415,000 ÷ years) PE 10–2B a b c $1,150,000 ($1,450,000 – $300,000) 10% = (1/10) $115,000 ($1,150,000 × 10%), or ($1,150,000 ÷ 10 years) PE 10–3A a b c $236,000 ($275,000 – $39,000) $5.90 per hour ($236,000 ÷ 40,000 hours) $15,694 (2,660 hours × $5.90) PE 10–3B a b c $57,000 ($69,000 – $12,000) $0.19 per mile ($57,000 ữ 300,000 miles) $14,630 (77,000 miles ì $0.19) 2,300 2,300 450 450 PE 10–4A a b 12.5% = [(1/16) × 2] $35,000 ($280,000 × 12.5%) PE 10–4B a b 5% = [(1/40) × 2] $68,750 ($1,375,000 × 5%) PE 10–5A a b c $5,500 [($82,000 – $16,000) ÷ 12] $43,500 [$82,000 – ($5,500 × 7)] $5,250 [($43,500 – $12,000) ÷ 6] PE 10–5B a b c $10,350 [($180,000 – $14,400) ữ 16] $76,500 [$180,000 ($10,350 ì 10)] $8,250 [($76,500 – $10,500) ÷ 8] PE 10–6A a $28,000 [($465,000 – $45,000) ÷ 15] b $6,000 loss {$235,000 – [$465,000 – ($28,000 × 8)]} c Cash Accumulated Depreciation—Equipment Loss on Sale of Equipment Equipment 235,000 224,000 6,000 465,000 CHAPTER 10 Fixed Assets and Intangible Assets PE 10–6B a $75,000 = $600,000 × [(1/16) × 2)] = $600,000 × 12.5% b $20,625 gain, computed as follows: Cost……………………………………………………… $600,000 Less: First-year depreciation…………………… (75,000) (65,625) [($600,000 – $75,000) × 12.5%] Second-year depreciation………………… $459,375 Book value at end of second year……………… Gain on sale ($480,000 – $459,375) = $20,625 c Cash Accumulated Depreciation—Equipment Equipment Gain on Sale of Equipment 480,000 140,625 600,000 20,625 PE 10–7A a $0.30 per ton = $127,500,000 ÷ 425,000,000 tons b $12,600,000 = 42,000,000 tons × $0.30 per ton c Dec 31 Depletion Expense Accumulated Depletion Depletion of mineral deposit 12,600,000 12,600,000 PE 10–7B a $1.04 per ton = $494,000,000 ÷ 475,000,000 tons b $32,760,000 = 31,500,000 tons × $1.04 per ton c Dec 31 Depletion Expense Accumulated Depletion Depletion of mineral deposit 32,760,000 32,760,000 PE 10–8A a b Dec Dec 31 Loss from Impaired Goodwill Goodwill Impaired goodwill 4,000,000 4,000,000 31 Amortization Expense—Patents Patents Amortized patent rights [($900,000 ÷ 15) × 5/12] 25,000 25,000 PE 10–8B a b Dec Dec 31 Loss from Impaired Goodwill Goodwill Impaired goodwill 6,000,000 6,000,000 31 Amortization Expense—Patents Patents Amortized patent rights [($1,500,000 ÷ 12) × 9/12] 93,750 93,750 PE 10–9A a Fixed Asset Turnover: Net sales……………………………… Fixed assets: Beginning of year……………… End of year……………………… Average fixed assets……………… Fixed asset turnover……………… b 2014 2013 $5,510,000 $4,880,000 $1,600,000 $2,200,000 $1,900,000 $1,450,000 $1,600,000 $1,525,000 [($1,600,000 + $2,200,000) ÷ 2] [($1,450,000 + $1,600,000) ÷ 2] 2.9 3.2 ($5,510,000 ÷ $1,900,000) ($4,880,000 ÷ $1,525,000) The decrease in the fixed asset turnover ratio from 3.2 to 2.9 indicates an unfavorable trend in the efficiency of using fixed assets to generate sales PE 10–9B a Fixed Asset Turnover: Revenue……………………………… Fixed assets: Beginning of year……………… End of year……………………… Average fixed assets……………… Fixed asset turnover……………… b 2014 2013 $1,668,000 $1,125,000 $ 670,000 $ 720,000 $ 695,000 $ 580,000 $ 670,000 $ 625,000 [($670,000 + $720,000) ÷ 2] [($580,000 + $670,000) ÷ 2] 2.4 1.8 ($1,668,000 ÷ $695,000) ($1,125,000 ÷ $625,000) The increase in the fixed asset turnover ratio from 1.8 to 2.4 indicates a favorable trend in the efficiency of using fixed assets to generate sales EXERCISES Ex 10–1 a b New printing press: 1, 2, 3, 5, Used printing press: 7, 8, 9, 11 Ex 10–2 a Yes All expenditures incurred for the purpose of making the land suitable for its intended use should be debited to the land account b No Land is not depreciated Ex 10–3 Initial cost of land ($100,000 + $700,000) Plus: Legal fees Delinquent taxes Demolition of building 35,500 Less salvage of materials Cost of land Ex 10–4 Capital expenditures: 3, 4, 5, 6, 7, 9, 10 Revenue expenditures: 1, 2, Ex 10–5 Capital expenditures: 2, 3, 4, 8, 9, 10 Revenue expenditures: 1, 5, 6, $800,000 $ 5,000 18,500 12,000 $835,500 4,000 $831,500 Ex 10–6 Mar June Nov 20 Accumulated Depreciation—Delivery Truck Cash 1,890 11 Delivery Truck Cash 1,350 1,890 1,350 30 Repairs and Maintenance Expense Cash 55 Ex 10–7 a No The $44,500,000 represents the original cost of the equipment Its replacement cost, which may be more or less than $44,500,000, is not reported in the financial statements b No The $29,800,000 is the accumulation of the past depreciation charges on the equipment The recognition of depreciation expense has no relationship to the cash account or accumulation of cash funds Ex 10–8 (a) 25% (1/4), (b) 12.5% (1/8), (c) 10% (1/10), (d) 6.25% (1/16), (e) 4% (1/25), (f) 2.5% (1/40), (g) 2% (1/50) Ex 10–9 $3,950 [($60,000 – $12,600) ÷ 12] Ex 10–10 $214,000 – $30,000 50,000 hours = $3.68 depreciation per hour 175 hours at $3.68 = $644 depreciation for January 55 Ex 10–11 a Depreciation Rate per Mile: Truck Truck Truck Truck #1 #2 #3 #4 ($80,000 ($54,000 ($72,900 ($90,000 – $15,000) – $6,000) – $10,900) – $22,800) ÷ ÷ ÷ ÷ 250,000 300,000 200,000 240,000 = $0.26 = $0.16 = $0.31 = $0.28 Truck No Rate per Mile Miles Operated $0.26 21,000 0.16 33,500 0.31 8,000 0.28 22,500 Total……………………………………………………………… Credit to Accumulated Depreciation $ 5,460 5,360 1,860 * 6,300 $18,980 * Mileage depreciation of $2,480 (31 cents × 8,000) is limited to $1,860, which reduces the book value of the truck to $10,900, its residual value b Depreciation Expense—Trucks Accumulated Depreciation—Trucks Truck depreciation Ex 10–12 18,980 First Year Second Year 5% of $90,000 = $4,500 or $90,000 ÷ 20 = $4,500 5% of $90,000 = $4,500 or $90,000 ÷ 20 = $4,500 10% of $90,000 = $9,000 10% of ($90,000 – $9,000) = $8,100 a b 18,980 Ex 10–13 a 4% of ($240,000 – $30,000) = $8,400 or [($240,000 – $30,000)/25] b Year 1: 8% of $240,000 = $19,200 Year 2: 8% of ($240,000 – $19,200) = $17,664 CHAPTER 10 Fixed Assets and Intangible Assets Ex 10–14 a Year 1: 9/12 × [($36,000 – $6,000) ÷ 10] = $2,250 Year 2: ($36,000 – $6,000) ÷ 10 = $3,000 b Year 1: 9/12 × 20% of $36,000 = $5,400 Year 2: 20% of ($36,000 – $5,400) = $6,120 Ex 10–15 a $17,250 [($780,000 $90,000) ữ 40] b $366,000 [$780,000 ($17,250 ì 24 yrs.)] c $29,600 [($366,000 – $70,000) ÷ 10 yrs.] Ex 10–16 Apr a Dec b 30 Carpet Cash 18,000 18,000 31 Depreciation Expense Accumulated Depreciation—Carpet Carpet depreciation [($18,000 ÷ 15 years) × 8/12] 800 800 Ex 10–17 a Cost of equipment……………………………………………………………………………… Accumulated depreciation at December 31, 2014 (4 years at $26,000* per year)……………………………………………………………… Book value at December 31, 2014…………………………………………………………… * (2) * 104,000 $316,000 ($420,000 – $30,000) ÷ 15 = $26,000 (1) b $420,000 Depreciation Expense—Equipment Accumulated Depreciation—Equipment Equipment depreciation ($26,000 × 9/12 = $19,500) Cash Accumulated Depreciation—Equipment* Loss on Sale of Equipment Equipment 19,500 19,500 275,000 123,500 21,500 420,000 $104,000 + $19,500 = $123,500 10-10 © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Prob 10–6A b c a $1,600,000 ÷ 5,000,000 board feet = $0.32 per board foot; 1,100,000 board feet × $0.32 per board foot = $352,000 b Loss from impaired goodwill, $3,750,000 c $6,600,000 ÷ 12 years = $550,000; 3/4 of $550,000 = $412,500 a Depletion Expense Accumulated Depletion Depletion of timber rights Loss from Impaired Goodwill Goodwill Impaired goodwill Amortization Expense—Patents Patents Patent amortization 352,000 352,000 3,750,000 3,750,000 412,500 412,500 Prob 10–1B Item a b c d e f g.* h i j.* k l m n o p q.* r s.* Land $ Building Other Accounts 3,600 780,000 23,400 15,000 $ 75,000 10,000 (3,400) 18,000 8,400 $(800,000) 13,400 3,000 2,000 $14,000 21,600 40,000 (4,500) 800,000 (1,400) $860,000 Land Improvements $35,600 $922,000 * Receipt Since land used as a plant site does not lose its ability to provide services, it is not depreciated However, land improvements lose their ability to provide services as time passes and are therefore depreciated Since Land Improvements are depreciated, depreciation expense of $4,320 ($21,600 × 1/10 × 2) would be understated and net income would be overstated by $4,320 on the income statement On the balance sheet, Land would be overstated by $21,600, Land Improvements would be understated by $17,280 ($21,600 – $4,320), and Owner’s Capital would be overstated by $4,320 Prob 10–2B Depreciation Expense Year a StraightLine Method b Units-ofOutput Method c DoubleDeclining-Balance Method $ 71,250 71,250 71,250 71,250 $102,600 91,200 62,700 28,500 $160,000 80,000 40,000 5,000 $285,000 $285,000 $285,000 2013 2014 2015 2016 Total Calculations: Straight-line method: ($320,000 – $35,000) ÷ = $71,250 each year Units-of-output method: ($320,000 – $35,000) ÷ 20,000 hours = $14.25 per hour 2013: 2014: 2015: 2016: 7,200 6,400 4,400 2,000 hours hours hours hours × $14.25 × $14.25 × $14.25 × $14.25 = $102,600 = $91,200 = $62,700 = $28,500 Double-declining-balance method: 2013: 2014: 2015: 2016: $320,000 × [(1/4) × 2] = $160,000 ($320,000 – $160,000) × [(1/4) × 2] = $80,000 ($320,000 – $160,000 – $80,000) × [(1/4) × 2] = $40,000 ($320,000 – $160,000 – $80,000 – $40,000 – $35,000*) = $5,000 * Book value should not be reduced below the residual value of $35,000 The double-declining-balance method yields the most depreciation expense in 2013 of $160,000 Over the four-year life of the equipment, all three depreciation methods yield the same total depreciation, $285,000, which is the cost of the equipment of $320,000 less the residual value of $35,000 Prob 10–3B a Straight-line method: 2012: 2013: 2014: 2015: b [($108,000 [($108,000 [($108,000 [($108,000 ữ 3] ì 3/12 ữ 3] ÷ 3]…………………………………………………… ÷ 3] × 9/12………………………………………… $ 8,400 × $8.40*……………………………………………………… × $8.40………………………………………………………… × $8.40……………………………………………………… × $8.40………………………………………………………… $11,340 – $7,200) – $7,200) – $7,200) – $7,200) 33,600 33,600 25,200 Units-of-output method: 2012: 2013: 2014: 2015: 1,350 4,200 3,650 2,800 hours hours hours hours 35,280 30,660 23,520 * ($108,000 – $7,200) ÷ 12,000 hours = $8.40 per hour c Double-declining-balance method: 2012: 2013: 2014: 2015: $108,000 × 2/3 × 3/12………… ………………………………………… ($108,000 – $18,000) × 2/3………………………………………………… ($108,000 – $18,000 – $60,000) × 2/3…………………………………… ($108,000 – $18,000 – $60,000 – $20,000 – $7,200*)………………… * Book value should not be reduced below $7,200, the residual value $18,000 60,000 20,000 2,800 Prob 10–4B Accumulated Depreciation Depreciation, Book Value, Expense End of Year End of Year $25,625* 25,625 25,625 25,625 $ 25,625 51,250 76,875 102,500 $84,375 58,750 33,125 7,500 $55,000 27,500 13,750 6,250* $ 55,000 82,500 96,250 102,500 $55,000 27,500 13,750 7,500 Year a 1………………………………………………… 2………………………………………………… 3………………………………………………… 4………………………………………………… * [($110,000 – $7,500) ÷ 4] b [$110,000 × (1/4) × 2]……………………… [$55,000 × (1/4) × 2]……………………… [$27,500 × (1/4) × 2]……………………… ($110,000 – $96,250 – $7,500)………… * Book value should not be reduced below $7,500, the residual value Cash Accumulated Depreciation—Equipment Equipment Gain on Sale of Equipment* 18,000 96,250 110,000 4,250 * $18,000 – $13,750 Cash Accumulated Depreciation—Equipment Loss on Sale of Equipment* Equipment * $13,750 – $10,500 10,500 96,250 3,250 110,000 Prob 10–5B 2012 Jan Mar Dec 2013 Jan Feb Apr Dec Delivery Truck Cash Truck Repair Expense Cash 31 Depreciation Expense—Delivery Truck Accum Depreciation—Delivery Truck Delivery truck depreciation [$24,000 × (1/4 × 2)] Delivery Truck Cash 28 Truck Repair Expense Cash 30 Depreciation Expense—Delivery Truck Accum Depreciation—Delivery Truck Delivery truck depreciation [($24,000 – $12,000) × (1/4 × 2) × 4/12] 24,000 24,000 900 900 12,000 12,000 50,000 50,000 250 250 2,000 2,000 30 Accum Depreciation—Delivery Truck Cash Loss on Sale of Delivery Truck Delivery Truck 14,000 9,500 500 31 Depreciation Expense—Delivery Truck Accum Depreciation—Delivery Truck Delivery truck depreciation [$50,000 × (1/8 × 2)] 12,500 24,000 12,500 Prob 10–5B (Concluded) 2014 Sept Delivery Truck Cash Depreciation Expense—Delivery Truck Accum Depreciation—Delivery Truck Delivery truck depreciation [($50,000 – $12,500) × (1/8 × 2) × 8/12] Cash Accum Depreciation—Delivery Truck Delivery Truck Gain on Sale of Delivery Truck Dec 31 Depreciation Expense—Delivery Truck Accum Depreciation—Delivery Truck Delivery truck depreciation [$58,500 × (1/10 × 2) × 4/12] 58,500 58,500 6,250 6,250 36,000 18,750 50,000 4,750 3,900 3,900 Prob 10–6B b c a Loss from impaired goodwill, $3,400,000 b $4,800,000 ÷ years = $600,000; 1/4 of $600,000 = $150,000 c $2,975,000 ÷ 12,500,000 board feet = $0.238 per board foot; 4,150,000 board feet × $0.238 per board foot = $987,700 a Loss from Impaired Goodwill Goodwill Impaired goodwill 3,400,000 3,400,000 Amortization Expense—Patents Patents Patent amortization 150,000 Depletion Expense Accumulated Depletion Depletion of timber rights 987,700 150,000 987,700 CASES & PROJECTS CP 10–1 It is considered unprofessional for employees to use company assets for personal reasons, because such use reduces the useful life of the assets for normal business purposes Thus, it is unethical for Dave Elliott to use Lyric Consulting Co.’s computers and laser printers to service his part-time accounting business, even on an after-hours basis In addition, it is improper for Dave’s clients to call him during regular working hours Such calls may interrupt or interfere with Dave’s ability to carry out his assigned duties for Lyric Consulting Co CP 10–2 You should explain to Nolan and Stacy that it is acceptable to maintain two sets of records for tax and financial reporting purposes This can happen when a company uses one method for financial statement purposes, such as straight-line depreciation, and another method for tax purposes, such as MACRS depreciation This should not be surprising, since the methods for taxes and financial statements are established by two different groups with different objectives That is, tax laws and related accounting methods are established by Congress The Internal Revenue Service then applies the laws and, in some cases, issues interpretations of the law and congressional intent The primary objective of the tax laws is to generate revenue in an equitable manner for government use Generally accepted accounting principles, on the other hand, are established primarily by the Financial Accounting Standards Board The objective of generally accepted accounting principles is the preparation and reporting of true economic conditions and results of operations of business entities You might note, however, that companies are required in their tax returns to reconcile differences in accounting methods For example, income reported on the company’s financial statements must be reconciled with taxable income Finally, you might also indicate to Nolan and Stacy that even generally accepted accounting principles allow for alternative methods of accounting for the same transactions or economic events For example, a company could use straight-line depreciation for some assets and double-declining-balance depreciation for other assets CP 10–3 a Straight-line method: 2012: 2013: 2014: 2015: 2016: 2017: b ($400,000 ($400,000 ($400,000 ($400,000 ($400,000 ($400,000 ữ 5) ì 1/2…………………………………………………… ÷ 5)………………………………………………………… ÷ 5)………………………………………………………… ÷ 5)………………………………………………………… ÷ 5)………………………………………………………… ÷ 5) × 1/2………………………………………………… ($400,000 ($400,000 ($400,000 ($400,000 ($400,000 ($400,000 × × × × × × $40,000 80,000 80,000 80,000 80,000 40,000 MACRS: 2012: 2013: 2014: 2015: 2016: 2017: 20%)……………………………………………………… $ 80,000 32%)…………………………………………………… 128,000 19.2%)…………………………………………………… 76,800 11.5%)………………………………………………… 46,000 11.5%)…………………………………………………… 46,000 5.8%)…………………………………………………… 23,200 CHAPTER 10 Fixed Assets and Intangible Assets CP 10–3 (Continued) a Straight-line method: Year 2012 Income before depreciation……………… $750,000 40,000 Depreciation expense…………………… Income before income tax……………… $710,000 284,000 Income tax………………………………… Net income………………………………… $426,000 b 2013 2014 2015 2016 2017 $750,000 80,000 $750,000 80,000 $750,000 80,000 $750,000 80,000 $750,000 40,000 $670,000 268,000 $402,000 $670,000 268,000 $402,000 $670,000 268,000 $402,000 $670,000 268,000 $402,000 $710,000 284,000 $426,000 MACRS: Year Income before depreciation…………… Depreciation expense…………………… Income before income tax……………… Income tax………………………………… Net income………………………………… 2012 2013 2014 2015 2016 2017 $750,000 80,000 $750,000 128,000 $750,000 76,800 $750,000 46,000 $750,000 46,000 $750,000 23,200 $670,000 268,000 $402,000 $622,000 248,800 $373,200 $673,200 269,280 $403,920 $704,000 281,600 $422,400 $704,000 281,600 $422,400 $726,800 290,720 $436,080 10-31 © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part CHAPTER 10 Fixed Assets and Intangible Assets CP 10–3 (Concluded) For financial reporting purposes, Tim should select the method that provides the net income figure that best represents the results of operations Note to Instructors: The concept of matching revenues and expenses is discussed in Chapter However, for income tax purposes, Tim should consider selecting the method that will minimize taxes Based on the analyses in (2), both methods of depreciation will yield the same total amount of taxes over the useful life of the equipment MACRS results in fewer taxes paid in the early years of useful life and more in the later years For example, in 2012 the income tax expense using MACRS is $268,000, which is $16,000 ($284,000 – $268,000) less than the income tax expense using the straight-line depreciation of $284,000 Tuttle Construction Co can invest such differences in the early years and earn income In some situations, it may be more beneficial for a taxpayer not to choose MACRS These situations usually occur when a taxpayer is expected to be subject to a low tax rate in the early years of use of an asset and a higher tax rate in the later years of the asset’s useful life In this case, the taxpayer may be better off to defer the larger deductions to offset the higher tax rate CP 10–4 Note to Instructors: The purpose of this activity is to familiarize students with the procedures involved in acquiring a patent, a copyright, and a trademark You may wish to divide the class into three groups to report back on patents, copyrights, and trademarks separately The following is some information on patents, copyrights, and trademarks that you may find helpful in your discussions Patents A patent is requested by filing a written application at the relevant patent office The person or company filing the application is referred to as “the applicant.” The applicant may be the inventor or its assignee The application contains a description of how to make and use the invention that must provide sufficient detail for a person skilled in the art (i.e., the relevant area of technology) to make and use the invention In some countries, there are requirements for providing specific information such as the usefulness of the invention, the best mode of performing the invention known to the inventor, or the technical problem or problems solved by the invention Drawings illustrating the invention may also be provided 10-32 © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part CHAPTER 10 Fixed Assets and Intangible Assets CP 10–4 (Concluded) The application also includes one or more claims, although it is not always a requirement to submit these when first filing the application The claims set out what the applicant is seeking to protect in that they define what the patent owner has a right to exclude others from making, using, or selling, as the case may be In other words, the claims define what a patent covers or the “scope of protection.” After filing, an application is often referred to as “patent pending.” While this term does not confer legal protection, and a patent cannot be enforced until granted, it serves to provide warning to potential infringers that if the patent is issued, they may be liable for damages Source: http://en.wikipedia.org/wiki/Patent#Application_and_prosecution Copyright While copyright in the United States automatically attaches upon the creation of an original work of authorship, registration with the Copyright Office puts a copyright holder in a better position if litigation arises over the copyright A copyright holder desiring to register his or her copyright should the following: Obtain and complete appropriate form Prepare clear rendition of material being submitted for copyright Send both documents to the U.S Copyright Office in Washington, D.C Source: http://en.wikipedia.org/wiki/United_States_copyright_law#Procedural_issues Trademark The law considers a trademark to be a form of property Proprietary rights in relation to a trademark may be established through actual use in the marketplace, or through registration of the mark with the trademarks office (or “trademarks registry”) of a particular jurisdiction In some jurisdictions, trademark rights can be established through either or both means Certain jurisdictions generally not recognize trademarks rights arising through use In the United States, the only way to qualify for a federally registered trademark is to first use the trademark in commerce If trademark owners not hold registrations for their marks in such jurisdictions, the extent to which they will be able to enforce their rights through trademark infringement proceedings will therefore be limited In cases of dispute, this disparity of rights is often referred to as “first to file” as opposed to “first to use.” Other countries such as Germany offer a limited amount of common law rights for unregistered marks where, to gain protection, the goods or services must occupy a highly significant position in the marketplace—where this could be 40% or more market share for sales in the particular class of goods or services Source: http://en.wikipedia.org/wiki/Trademark#Maintaining_rights CHAPTER 10 CP 10–5 a Fixed Asset Turnover Ratio = Fixed Assets and Intangible Assets Revenue Average Book Value of Fixed Assets Walmart: $421,849 $105,093 = 4.01 Occidental Petroleum: $19,045 $33,837 = 0.56 Comcast Corporation: $37,937 $23,685 = 1.60 b The fixed asset turnover measures the amount of revenue earned per dollar of fixed assets Walmart earns $4.01 of revenue for every dollar of fixed assets, while Occidental earns $0.56 and Comcast Corporation earns $1.60 in revenue for every dollar of fixed assets Occidental and Comcast require more fixed assets to operate their businesses than does Walmart, for a given level of revenue volume Does this mean that Walmart is a better company? Not necessarily Revenue is not the same as earnings More likely, Walmart has a smaller profit margin than Occidental and Comcast Although not required by the exercise, the income from operations before interest and taxes as a percent of sales (operating margin) for the three companies is Occidental, 39.2%; Comcast, 21.8%; and Walmart, 6.1% Thus, the difference between the fixed asset turnovers seems reasonable Generally, companies with very low fixed asset turnovers, such as gas and oil exploration and production (Occidental) and cable communications (Comcast), must be compensated with higher operating margins Note to Instructors: You may wish to consider the impact of different fixed asset turnover ratios across industries and the implications of these differences This is a conceptual question designed to have students think about how competitive markets would likely reward the low fixed asset turnover companies for embracing high fixed asset commitments ... $5,250 [($43,500 – $12,000) ÷ 6] PE 10 5B a b c $10, 350 [($180,000 – $14,400) ÷ 16] $76,500 [$180,000 – ( $10, 350 × 10) ] $8,250 [($76,500 – $10, 500) ÷ 8] PE 10 6A a $28,000 [($465,000 – $45,000)... cash funds Ex 10 8 (a) 25% (1/4), (b) 12.5% (1/8), (c) 10% (1 /10) , (d) 6.25% (1/16), (e) 4% (1/25), (f) 2.5% (1/40), (g) 2% (1/50) Ex 10 9 $3,950 [($60,000 – $12,600) ÷ 12] Ex 10 10 $214,000 –... ($240,000 – $19,200) = $17,664 CHAPTER 10 Fixed Assets and Intangible Assets Ex 10 14 a Year 1: 9/12 × [($36,000 – $6,000) ÷ 10] = $2,250 Year 2: ($36,000 – $6,000) ÷ 10 = $3,000 b Year 1: 9/12 ×