Acct 551 - Homework 1

Topics: Balance sheet, Goodwill, Intangible asset Pages: 4 (1172 words) Published: January 13, 2013
E12-1 (Classification Issues—Intangibles) Presented below is a list of items that could be included in the intangible assets section of the balance sheet. 1.Investment in a subsidiary company.
3.Cost of engineering activity required to advance the design of a product to the manufacturing stage. 4.Lease prepayment (6 months’ rent paid in advance).
5.Cost of equipment obtained.
6.Cost of searching for applications of new research findings. 7.Costs incurred in the formation of a corporation.
8.Operating losses incurred in the start-up of a business.
9.Training costs incurred in start-up of new operation.
10.Purchase cost of a franchise.
11.Goodwill generated internally.
12.Cost of testing in search for product alternatives.
13.Goodwill acquired in the purchase of a business.
14.Cost of developing a patent.
15.Cost of purchasing a patent from an inventor.
16.Legal costs incurred in securing a patent.
17.Unrecovered costs of a successful legal suit to protect the patent. 18.Cost of conceptual formulation of possible product alternatives. 19.Cost of purchasing a copyright.
20.Research and development costs.
21.Long-term receivables.
22.Cost of developing a trademark.
23.Cost of purchasing a trademark.

(a)Indicate which items on the list above would generally be reported as intangible assets in the balance sheet. (b)Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements.

(a) 10, 13, 15, 16, 17, 19, 23
(b) 1. Long-term investments in the balance sheet.
2. Property, plant, and equipment in the balance sheet.
3. Research and development expense in the income statement. 4. Current asset (prepaid rent) in the balance sheet.
5. Property, plant, and equipment in the balance sheet.
6. Research and development expense in the income statement. 7. Charge as expense in the income statement.
8. Operating losses in the income statement.
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