Click to edit Master title style 1 1 1 Fixed Assets and Intangible Assets 10

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Click to edit Master title style

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Fixed Assets Fixed Assets and Intangible and Intangible

AssetsAssets

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1. Define, classify, and account for the cost of fixed assets.

2. Compute depreciation, using the following methods: straight-line method, units-of-production method, and double-declining-balance method.

After studying this chapter, you should be able to:

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3. Journalize entries for the disposal of fixed assets.

4. Compute depletion and journalize the entry for depletion.5. Describe the accounting for intangible assets, such as

patents, copyrights, and goodwill.


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6. Describe how depreciation expense is reported in an income statement, and prepare a balance sheet that includes fixed assets and intangible assets.


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Define, classify, and account for the cost of fixed assets.

Objective 1Objective 1Objective 1Objective 1

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Nature of Fixed Assets

Fixed assets are long-term or relatively permanent assets. They are

tangible assets because they exist physically. They are owned and used

by the business and are not offered for sale as part of normal operations.

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Fixed Assets as a Percentof Total Assets

Service Firms:Pembangunan Jaya Ancol Tbk. (Recreation Park) 35.74%Bayu Buana Tbk. (Travel Agent) 8.65%Bank Rakyat Indonesia Tbk. (Bank) 1.18%

Manufacturing Firms:Kimia Farma Tbk. (Pharmaceuticals) 78.67%Sepatu Bata Tbk. (Shoes Factory) 25.13%Indofood Sukses Makmur Tbk. (Food and Beverage) 39.97%

Merchandising Firms:Alfa Retailindo Tbk. 44.07%Hero Supermarket Tbk. 34.25%Metro Supermarket Tbk. 22.72%

Fixed Assets as a Percent of Total Assets—Selected Companies

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Is the purchased item long-lived?

yes

Is the asset used in a productive purpose?

no

Expense

yes

Fixed Assets

no

Investment property

Classifying Costs 10-1

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Purchase price Sales taxes Permits from government agencies Broker’s commissions Title fees Surveying fees Delinquent real estate taxes Razing or removing unwanted

buildings, less any salvage Grading and leveling Paving a public street bordering the

land

LAND

Cost of Acquiring Fixed Assets 10-1

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1010

Architects’ fees Engineers’ fees Insurance costs incurred during construction Interest on money borrowed to finance

construction Walkways to and around the building Sales taxes Repairs (purchase of existing building) Reconditioning (purchase of existing

building) Modifying for use Permits from government agencies

BUILDING

Cost of Acquiring Fixed Assets 10-1

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Sales taxes Freight Installation Repairs (purchase of used

equipment) Reconditioning (purchase

of used equipment) Insurance while in transit Assembly

Trees and shrubs Fences Outdoor lighting Paved parking areas

Cost of Acquiring Fixed Assets

MACHINERY AND EQUIPMENT

LAND IMPROVEMENT

Modification for use Testing for use Permits from government

agencies

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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

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Expenditures that benefit only the current period are called revenue expenditures. Expenditures that

improve the asset or extend its useful life are capital expenditures.

Capital and Revenue Expenditures 10-1

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CAPITAL EXPENDITURES

1) Additions2) Improvements3) Extraordinary

repairs

Normal and ordinary repairs and maintenance

REVENUE REVENUE EXPENDITURESEXPENDITURES

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Ordinary Maintenance and Repairs

On April 9, the firm paid Rp 300,000 for a tune-up of a delivery truck.

Apr. 9 Repairs and Maintenance Exp. 300 000

Cash 300 000

10-1

This is a revenue This is a revenue expenditureexpenditure

This is a revenue This is a revenue expenditureexpenditure

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Asset Improvements

On May 4, a Rp 5,500,000 hydraulic lift was installed on the delivery truck to allow for easier

and quicker loading of heavy cargo.

May 4 Delivery Truck 5 500 000

Cash 5 500 000

10-1

This is a capital expenditureThis is a capital expenditureThis is a capital expenditureThis is a capital expenditure

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Extraordinary Repairs

The engine of a forklift that is near the end of its useful life is overhauled at a cost of Rp 4,500,000 which extends its useful life eight years. Work on

the forklift was completed on Oct. 14.

Oct. 14 Accum. Depreciation—Forklift 4 500 000

Cash 4 500 000

10-1

This is a capital expenditureThis is a capital expenditureThis is a capital expenditureThis is a capital expenditure

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Capital or Revenue Expenditure

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10-1

Example Exercise 10-1

On June 18 GTS Co. paid Rp 1,200,000 to upgrade a hydraulic lift and Rp 45,000 for an oil change for one of its delivery trucks. Journalize the entries for the hydraulic lift upgrade and oil change expenditures.

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Follow My Example 10-1

June 18 Delivery Truck 1,200,000Cash 1,200,000

18 Repairs and Maintenance Exp. 45,000Cash 45,000

For Practice: PE 10-1A, PE 10-1B

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Leasing Fixed Assets

A capital lease is accounted for as if the lessee has, in

fact, purchased the asset. The asset is then amortized over the life of the capital lease.

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Leasing Fixed Assets

A lease that is not classified as a capital lease for accounting

purposes is classified as an operating lease (an

operating leases is treated as an expense).

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Compute depreciation using the following methods: straight-line

method, units-of-production method, double-declining-balance method.


10-2

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Over time, fixed assets such as equipment, buildings, and land

improvements lose their ability to provide services. The periodic

transfer of the cost of fixed assets to expense is called depreciation.

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Accounting for Depreciation

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Physical depreciation occurs from wear and tear while in use and from the action of the weather Functional depreciation

occurs when a fixed asset is no longer able to provide services at the level for

which it was intended.

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Physical and Functional Depreciation

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Factors in Computing Depreciation

The three factors in determining the amount of depreciation expense to be

recognized each period are: (a) the fixed asset’s initial cost, (b) its expected useful life, and (c) its estimated value at the end

of the useful life.

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The fixed asset’s estimated value at the end of its useful life is called the residual value, scrap value, salvage

value, or trade-in value. A fixed asset’s residual value and its expected

useful life must be estimated at the time the asset is placed in service.

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Residual Value

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88%

2%

7% 3%

Source: Accounting Trends & Techniques, 59th ed., American Institute of Certified Public Accountants, New York, 2005.

Exhibit 5: Use of Depreciation Methods

Straight-line

Units-of-production

Double-declining-balance

Other

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Straight-Line Method 10-2

The straight-line method provides for the same amount of

depreciation expense for each year of the asset’s useful life.

Annual depreciation =Cost – estimated residual value

Estimated life

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A depreciable asset cost Rp 24,000,000. Its estimated residual value is Rp 2,000,000

and its estimated life is 5 years.

Annual depreciation =Cost – estimated residual value

Estimated life

Annual depreciation = Rp 24,000,000 – Rp 2,000,000

5 years

Annual depreciation = Rp 4,400,000

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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.

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10-2


Equipment that was acquired at the beginning of the year at a cost of Rp 125,000,000 has an estimated residual value of Rp 5,000,000 and an estimated useful life of 10 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

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(a) Rp 120,000,000 (Rp 125,000,000 – Rp 5,000,000)

(b) 10% = (1/10)

(c) Rp 12,000,000 (Rp 120,000,000 x 10%) or (Rp 120,000,000 ÷ 10 years)


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Units-of-Production Method 10-2

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The units-of-production method provides for the same amount of depreciation

expense for each unit produced or each unit of capacity used by the asset.

Unit depreciation =Cost – estimated residual value

Estimated hours, units, etc.

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A machine with a cost Rp 24,000,000. Its estimated residual value is Rp 2,000,000 and its

expected to have an estimated life of 10,000 operating hours.

Hourly depreciation =Rp 24,000,000 – Rp 2,000,000

10,000 estimated hours

Hourly depreciation = Rp 2,200 hourly depreciation

Hourly depreciation =Cost – estimated residual value

Estimated hours

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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.

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10-2Example Exercise 10-3

Equipment acquired at a cost of Rp 180,000,000 has an estimated residual value of Rp 10,000,000 an estimated useful life of 40,000 hours, and was operated 3,600 hours during the year. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-production depreciation for the year.

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(a) Rp 170,000,000 (Rp 180,000,000 – Rp 10,000,000)

(b) Rp 4,250 per hour (Rp 170,000,000/40,000 hours)

(c) Rp 15,300 (3,600 hours x Rp 4,250)


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Double-Declining-Balance Method

The double-declining-balance method provides for a declining periodic

expense over the estimated useful life of the asset.

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A double-declining balance rate is determined by doubling the straight-line rate. A shortcut to determining the straight-line rate is to divide one by the number of years (1/5 = .20). Hence, using the double-declining-

balance method, a five-year life results in a 40 percent rate (.20 x 2).

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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. Continuing with the example where the fixed asset cost Rp 24,000,000

and has an expected residual value of Rp 2,000,000 a table can be built.

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Rp 24,000,000 x .40

Book Value Accum. Beginning Annual Deprec. Book Value Year of Year Rate Deprec. Year-End Year-End

1 Rp 24,000,000 40% Rp 9,600,000

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1 Rp 24,000,000 40% Rp 9,600,000 Rp9,600,000 Rp14,400,000

2 14,400,000 40% 5,760,000


Rp 14,400,000 x .40

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

2 14,400,000 40% 5,760,000 15,360,000 8,640,000


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

2 14,400,000 40% 5,760,000 15,360,000 8,640,000

3 8,640,000 40% 3,456,000 18,816,000 5,184,000


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

2 14,400,000 40% 5,760,000 15,360,000 8,640,000

3 8,640,000 40% 3,456,000 18,816,000 5,184,000

4 5,184,000 40% 2,073,600 20,889,600 3,110,040


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

2 14,400,000 40% 5,760,000 15,360,000 8,640,000

3 8,640,000 40% 3,456,000 18,816,000 5,184,000

4 5,184,000 40% 2,073,600 20,889,600 3,110,040

5 3,110,040 40% 1,110,400 22,000,000 2,000,000


STOPSTOPDEPRECIATION STOPS WHEN

BOOK VALUE EQUALS RESIDUAL VALUE!

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

2 14,400,000 40% 5,760,000 15,360,000 8,640,000

3 8,640,000 40% 3,456,000 18,816,000 5,184,000

4 5,184,000 40% 2,073,600 20,889,600 3,110,040

5 3,110,040 – Rp 2,000,000 1,110,400 22,000,000 2,000,000


Desired ending book

value

“Forced” annual

depreciation

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10-2Example Exercise 10-4

Equipment that was acquired at the beginning of the year at a cost of Rp 125,000,000 has an estimated residual value of Rp 5,000,000 and an estimated useful life of 10 years. Determine the (a) depreciable cost, (b) double-declining-balance rate, and (c) double-declining balance depreciation for the first year.

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(a) Rp 120,000,000 (Rp 125,000,000 – Rp 5,000,000)

(b) 20% [(1/10) x2]

(c) Rp 25,000,000 (Rp 125,000,000 x 20%)


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Summary of Depreciation Methods

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Comparing Depreciation Methods

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Depreciation for Govenment Income Tax

Indonesia Directorate General of Tax (DGT) specifies the depreciation rate for each group

of fixed asset.

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DGT specifies Six classes of useful life and depreciation rates for each

class. The two most common classes are the 4-year class (includes public

transport vehicles and office equipment from woods) and the 8-

year class (includes most machinery, automobiles and equipment).

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5252

A machine purchased for Rp 140,000,000 was originally estimated to have a useful life of five years and a residual value of Rp 10,000,000. The asset has been depreciated for two years

using the straight-line method.

Revising Depreciation Estimates

Rp140,000,000 – Rp10,000,000

5 years

Annual Depreciation (S/L) =

Rp26,000,000 per yearAnnual

Depreciation (S/L) =

10-2

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5353

At the end of two years, the asset’s book value is Rp 88,000,000, determined as follows:

Asset costRp 140,000,000

Less accumulated depreciation(Rp 26,000,000 per year x 2 years) 52,000,000 Book value, end of second yearRp 88,000,000

10-2

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5454

During the third year, the company estimates that the remaining useful life is eight years (instead of three) and that the residual value is Rp 8,000,000 (instead of Rp 10,000,000). Depreciation expense for each of the remaining eight year is determined as follows:

Book value, end of second yearRp 88,000,000

Less revised estimated residual value 8,000,000

Revised remaining depreciation costRp 80,000,000

Revised annual depreciation expense(Rp80,000,000 ÷ 8 years) Rp 10,000,000

10-2

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A warehouse with a cost of Rp 500,000,000 has an estimated residual value of Rp 120,000,000 an estimated useful life of 40 years, and is depreciated by the straight-line method. (a) Determine the amount of annual depreciation. (b) Determine the book value at the end of the 20th year of use. (c) If at the start of the 21st year it is estimated that the remaining life is 25 years and that the residual value is Rp 150,000,000 determine the depreciation expense for each of the remaining 25 years.

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10-2

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56For Practice: PE 10-5A, PE 10-5B 56


a. Rp 9,500,000 [(Rp 500,000,000 – Rp 120,000,000)/40]

b. Rp 310,000,000 [Rp 500,000,000 – (Rp 9,500,000 x 20)]

c. Rp 6,400,000 [Rp 310,000,000 – Rp 150,000,000)/25]

10-2

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Journalize entries for the disposal of

fixed assets.


10-3

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Discarding Fixed Assets

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

Feb. 14 Accumulated Depr.—Equipment 25 000 00

Equipment 25 000 00

To write off equipment

discarded.

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10-3

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Equipment costing Rp 6,000,000 is depreciated at an annual straight-line rate of 10%. After the adjusting entry, Accumulated Depreciation—Equipment had a Rp 4,750,000 balance. The

equipment was discarded on March 24.Mar. 24 Depreciation Expense—Equipment 150 000

Accum. Depr.—Equipment 150 000

To record current

depreciation on

equipment discarded.

Rp 600,000 x 3/12Rp 600,000 x 3/12

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The discarding of the equipment is then recorded by the following entry:

Mar. 24 Accum. Depreciation—Equipment 4 900 000

Loss on Disposal of Fixed Assets 1 100 000

Equipment 6 000 000

To write off equipment

discarded.

10-3

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6161

Equipment costing Rp 10,000,000 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 Rp 7,000,000 and needs to be updated.

Selling Fixed Assets

Oct. 12 Depreciation Expense—Equipment 750 000

Accum. Depr.—Equipment 750 000To record current

depreciation on

equipment sold.

Rp 10,000,000 Rp 10,000,000 x ¾ x 10%x ¾ x 10%

Rp 10,000,000 Rp 10,000,000 x ¾ x 10%x ¾ x 10%

10-3

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The equipment is sold on October 12 for Rp 2,250,000. No gain or

loss.Oct. 12 Cash 2 250 000

Accum. Depreciation—Equipment 7 750 000

Equipment 10 000 000

Sold equipment at book

value.

10-3

Assumption 1

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Oct. 12 Cash 1 000 000


Loss on Disposal of Fixed Assets 1 250 000Equipment 10 000 000

Sold equipment at a loss.

The equipment is sold on October 12 for Rp 1,000,000; a loss of Rp

1,250,000.

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10-3

Assumption 2

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Oct. 12 Cash 2 800 000



Sold equipment at a gain.

The equipment is sold on October 12 for Rp 2,800,000; a gain of Rp

550,000.

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Gain on Disp. of Fixed Assets 550 000

10-3

Assumption 3

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10-3


Equipment was acquired at the beginning of year at a cost of Rp 91,000,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 9 years and an estimated residual value of Rp 10,000,000.

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a. What was the depreciation for the first year?b. Assuming the equipment was sold at the end of the

second year for Rp 78,000,000 determine the gain or loss on sale of the equipment.

c. Journalize the entry to record the sale.

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66For Practice: PE 10-6A, PE 10-6B 66


a. Rp 9,000,000 [(Rp 91,000,000 – Rp 10,000,000)/9]

b. Rp 5,000,000 gain; Rp 78,000,000 – [Rp 91,000,000 – (Rp 9,000,000 x 2)]

10-3

c. Cash 78,000,000Accum. Depreciation—Equipment 18,000,000

Equipment 91,000,000Gain on Disposal of Fixed Assets 5,000,000

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Exchanging Fixed Assets

When old equipment is traded for new equipment, the seller often allows the buyer a trade-in allowance for the old equipment traded. The remainder, the boot, is either

paid in cash or recorded as a liability.

10-3

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10-3

Gains on exchanges of similar fixed assets are not recognized

for financial reporting purposes.

IMPORTANT!

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On June 19, assume that new equipment being purchased has a list

price of Rp 5,000,000. The dealer allows a trade-in allowance of Rp

1,100,000 on the old, similar equipment. The old equipment cost Rp 4,000,000 and has a book value

of Rp 800,000.

10-3

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Two Methods of Determining Cost

Method One

List price of new equipment Rp 5,000,000Trade-in allowance Rp 1,100,000Book value of old equipment 800,000Unrecognized gain on exchange (300,000)Cost of new equipment Rp 4,700,000

10-3

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Method Two

Book value of old equipment Rp 800,000Cash paid at date of exchange 3,900,000Cost of new equipment Rp 4,700,000

Note that either method provides the same cost for the new equipment.

10-3

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7272

On June 19, equipment was exchanged at a gain of Rp 300,000.

June 19 Accum. Depreciation—Equipment 3 200 000

Equipment (old equipment) 4 000 000

To record exchange of

equipment.

Cash 3 900 000

Equipment (new equipment) 4 700 000

10-3

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Losses on Exchanges

For financial reporting purposes, losses are recognized on exchange of similar fixed

assets if the trade-in allowance is less than the book value of the old equipment. On

September 7, new equipment was acquired by trading in old equipment with a cost of

Rp 7,000,000 and a book value of Rp 2,400,000 and giving a cash payment of Rp

8,000,000.

10-3

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7474

Cost of old equipment Rp 7,000,000Accumulated depreciation at date of exchange 4,600,000Book value at September 7, date of exchange Rp 2,400,000Trade-in allowance on old equipment 2,000,000Loss on exchange Rp 400,000

Sept 7 Accum. Depreciation—Equipment 4 600 000


Loss on Disposal of Fixed Assets 400 000

Equipment 7 000 000

Cash 8 000 000

To record exchange of

equipment with loss.

10-3

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10-3


On the first day of the fiscal year, a delivery truck with a list price of Rp 75,000,000 was acquired in exchange for an old delivery truck and Rp 63,000,000 cash. The old truck had a cost of Rp 50,000,000 and accumulated depreciation of Rp 39,500,000.

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a. Determine the cost of the new truck for financial reporting purposes.

b. Journalize the entry to record the exchange.

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7676


a. Rp 73,500,000

List price of new truckRp 75,000,000

Trade-in allowance on old truck ($75,000 – $63,000) Rp 12,000,000

Book value of old truck ($50,000 – $39,500) 10,500,000

Unrecognized gain on exchange (1,500,000)

Cost of new truckRp 73,500,000

(Continued)

or

10-3

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For Practice: PE 10-7A, PE 10-7B77


Book value of old truck (Rp 50,000,000 –Rp 39,500,000)

Rp 10,500,000Plus cash paid at date of exchange

63,000,000Cost of new truckRp 73,500,000

b. Truck (new) 73,500,000Accumulated Depreciation— Truck (old) 39,500,000

Truck (old)50,000,000

Cash 63,000,000

10-3

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Compute depletion and journalize the entry for depletion.


10-4

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The process of transferring the cost of natural resources to an

expense account is called depletion.

Natural Resources 10-4

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Recording Depletion 10-4

A business paid Rp 400,000,000 for the mining rights to a mineral deposit estimated at 1,000,000 tons of ore. The depletion rate is Rp 400 per ton (Rp 400,000,000/1,000,000 tons).

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8181

Dec. 31 Depletion Expense 36 000 000

Accumulated Depletion 36 000 000

Depletion of mineral

deposit.

Adjusting Entry

10-4

If 90,000 tons are mined during the year, an adjusting entry is

required at the end of the accounting period.

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10-4


Earth’s Treasures Mining Co. acquired mineral rights for Rp 45,000,000,000. The mineral deposit is estimated at 50,000,000 tons. During the current year, 12,600,000 tons were mined and sold.

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a. Determine the depletion rate.

b. Determine the amount of depletion expense for the current year.

c. Journalize the adjusting entry on December 31 to recognize the depletion expense.

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For Practice: PE 10-8A, PE 10-8B83


a. Rp 900 per ton = Rp 45,000,000,000/50,000,000 tons

b. Rp11,340,000,000 = (12,600,000 tons x Rp 900 per ton)

10-4

c. Dec. 31 Depletion Expense 11,340,000,000Accumulated Depletion

11,340,000,000Depletion of mineral deposit.

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Describe the accounting for intangible assets,

such patents, copyrights, and goodwill.


10-5

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Intangible Assets

Patents, copyrights, trademarks, and goodwill are long-lived assets that

are useful in the operations of a business and not held for sale. These

assets are called intangible assets because they do not exist physically.

10-5

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The exclusive right granted by the federal government to

manufacturers to produce and sell goods with one or more unique

features is a patent. These rights continue in effect for 20 years.

10-5

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At the beginning of its fiscal year, a business acquires a patent right for Rp 100,000,000. Its

remaining useful life is estimated at 5 years.

10-5

Journalizing Amortization of a Patent

Dec. 31 Amortization Expense—Patents 20 000 000

Patents 20 000 000

Patent amortization

(Rp 100,000,000/5).

Adjusting Entry

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10-5

Dec. 31 Amortization Expense—Patents 20 000 000

Patents 20 000 000

Patent amortization

(Rp 100,000,000/5).

Adjusting Entry

Because a patent (and other intangible assets) does not exist physically, it is acceptable to credit the asset. This

approach is different from physical fixed assets that require the use of a contra asset account.

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The exclusive right granted by the federal government to publish and sell a literary, artistic, or musical composition is a copyright. A copyright extends for 70 years

beyond the author’s death.

10-5

Copyright

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A trademark is a unique name, term, or symbol used to identify a business and its products. Most businesses identify their

trademarks with ® in their advertisements and on their products. Trademarks can be

registered for 10 years and can be renewed every 10 year period thereafter.

10-5

Trademark

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In business, goodwill refers to an intangible asset of a business that is created from such favorable factors

as location, product quality, reputation, and managerial skill.

10-5

Goodwill

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Generally accepted accounting principles permit goodwill to be recorded in the

accounts only if it is objectively determined by a transaction.

10-5

93


93

93

Impaired Goodwill 10-5

A loss should be recorded if the business prospects of the acquired firm (and the acquired

goodwill) become significantly impaired.

Mar. 19 Loss from Impaired Goodwill 50 000 000

Goodwill 50 000 000

Impaired goodwill.

93

94


94

94

10-5


On December 31 it was estimated that goodwill of Rp 40,000,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for Rp 484,000,000 on July 1.

a. Journalize the adjusting entry on December 31, for the impaired goodwill.

b. Journalize the adjusting entry on December 31 for the amortization of the patent rights.

94

95


95

95



a. Dec. 31 Loss from Impaired Goodwill 40,000,000Goodwill

40,000,000Impaired goodwill.

10-5

95

b. Dec. 31 Amortization Expense—Patents 3,500,000Patents

3,500,000Amortized patent rights[(Rp 84,000,000/12) x (6/12)].

96


96

96

Describe how depreciation expense is reported in an

income statement, and prepare a balance sheet that includes fixed assets

and intangible assets.


10-6

97


97

97

10-6

The fixed assets may be shown at their net amount.

The amount of each major class of fixed assets should be disclosed in the balance sheet or in notes.

Office equipment Rp 125,750,000Less accumulated depreciation 86,300,000 Net book value Rp 39,450,000

98


98

98

10-6

The cost of mineral rights or ore deposits is normally shown as part of the fixed asset section of the balance sheet. The related accumulated depletion should also be disclosed.

Intangible assets are usually reported (net of amortization) in the balance sheet in a separate section immediately following fixed assets.

99


99

99

Total Current Assets 1,647,854,000,000

Property,Plant, and EquipmentCost Accum.Depr Book Value

Land 102,249,000,000 0 102,249,000,000Road & Bridges 430,410,000,000 162,006,000,000 268,404,000,000Building, Installations and Machinery 794,147,000,000 217,622,000,000 576,525,000,000Machinery and Equipment 766,698,000,000 291,510,000,000 475,188,000,000Vehicles 257,916,000,000 147,864,000,000 110,052,000,000Office and Housing Equipment 48,010,000,000 37,758,000,000 10,252,000,000Construction in Progress 212,904,000,000 0 212,904,000,000

2,612,334,000,000 856,760,000,000 1,755,574,000,000

PlantationsMature Plantations

Cost Accum. Depl. Book ValueOil Palm 1,207,204,000,000 543,310,000,000 663,894,000,000Rubber 19,834,000,000 8,492,000,000 11,342,000,000Cocoa 0 0 0

1,227,038,000,000 551,802,000,000 675,236,000,000

Immature PlantationsOil Palm 659,536,000,000 0 659,536,000,000Rubber 7,760,000,000 0 7,760,000,000

667,296,000,000 667,296,000,000

Total Property, Plant and Equipment 2,430,810,000,000

Intagible AssetsGoodwill 66,947,000,000

Total Intagible Asset 66,947,000,000

PT ASTRA AGRO LESTARI TbkBALANCE SHEET (PARTIAL)

31-Dec-07

Assets

Fixed Assets and Intangible Assets in the Balance Sheet

10-6

100


100

100100

10-6

Fixed Asset Turnover Ratio

One measure of the revenue-generating efficiency of fixed assets is the fixed asset turnover ratio. It measures the number of

dollars of revenue earned per dollar of fixed assets and is computed as follows:


Revenue

Average Book Value of Fixed Assets

=

101


101

101101

10-6

Financial Analysis and Interpretation

For Rimo Department Store


Revenue

Average Book Value of Fixed Assets

=


Rp 199,246,551,622(24,661,628,738 + 33,455,273,668)/2 =

Fixed Asset Turnover Ratio = 6.68

Conclusion: For every Rupiahs of fixed assets, Rimo earns Rp6.68 of revenue.

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