Exercise 12-1 Presented below is a list of items that could be included in the i

Question

Exercise 12-1 Presented below is a list of items that could be included in the intangible assets section of the balance sheet. Indicate which items on the list below would generally be reported as intangible assets in the balance sheet. Reported as 1. Investment in a subsidiary company. 2. Timberland 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

Explanation / Answer

1. Investment in a subsidiary company.....Not an Intangible Assets

Explanation: In the balance sheet as long-term investments

2. Timberland. .....Not an Intangible Assets

Explanation: In the balance sheet under property, plant and equipment

3. Cost of engineering activity required to advance the design of a product to the manufacturing stage. .....Not an Intangible Assets

Explanation: Research and development expense in the income statement

4. Lease prepayment (6 months’ rent paid in advance). .....Not an Intangible Assets

Explanation: In the balance sheet under current asset (prepaid rent)

5. Cost of equipment obtained. .....Not an Intangible Assets

Explanation: In the balance sheet under property, plant and equipment

6. Cost of searching for applications of new research findings......Not an Intangible Assets

Explanation: Research and development expense in the income statement

7. Costs incurred in the formation of a corporation......Not an Intangible Assets

Explanation: Charge as expense in the income statement.

8. Operating losses incurred in the start-up of a business......Not an Intangible Assets

Explanation: In the income statement under operating losses

9. Training costs incurred in start-up of new operation. .....Not an Intangible Assets

Explanation: In the income statement charge as expense

10. Purchase cost of a franchise.....INTANGIBLE ASSETS

11. Goodwill generated internally......Not an Intangible Assets

Explanation: Not recorded because any costs related for the creation of goodwill that is incurred internally must be expensed

12. Cost of testing in search for product alternatives. .....Not an Intangible Assets

Explanation: Research and development expense in the income statement

13. Goodwill acquired in the purchase of a business....INTANGIBLE ASSETS

14. Cost of developing a patent......Not an Intangible Assets

Explanation: Research and development expense in the income statement

15. Cost of purchasing a patent from an inventor. ....INTANGIBLE ASSETS

16. Legal costs incurred in securing a patent. ....INTANGIBLE ASSETS

17. Unrecovered costs of a successful legal suit to protect the patent. ....INTANGIBLE ASSETS

18. Cost of conceptual formulation of possible product alternatives. .....Not an Intangible Assets

Explanation: Research and development expense in the income statement

19. Cost of purchasing a copyright. ....INTANGIBLE ASSETS

20. Research and development costs......Not an Intangible Assets

Explanation: Research and development expense in the income statement

21. Long-term receivables. .....Not an Intangible Assets

Explanation: In the balance sheet as long-term investments

22. Cost of developing a trademark. .....Not an Intangible Assets

Explanation: In the income statement charge as expense

23. Cost of purchasing a trademark....INTANGIBLE ASSETS

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.