ACTP 5007_class 1 (2009) (version 2)

ACTP 5007_class 1 (2009) (version 2) - Exercise...

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Exercise 12-1 (Classification Issues -Intangibles) Presented below is a list of items that could be included in the intangible assets section of the balance sheet. Instructions: (a) Indicate which items on the list above would generally be reported as intangible assets on the balance sheet. (b) Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements. Item Classification 1 Investment in a subsidiary company. Long-term investments on bal sheet 2 Timberland Property, plant, and equipment on bal sheet. 3 Cost of engineering activity required to advance the design of a Research and development expense on the Income Statement product to the manufacturing stage. 4 Lease prepayment (6 months' rent paid in advance) Current asset (prepaid rent) on the bal sheet. 5 Cost of equipment obtained PPE on the balance sheet 6 Cost of searching for applications of new research findings R&D expense on the Income Statement. 7 Cost incurred in the formation of a corporation Charge as an expense on the Income Statement 8 Operating losses incurred in the start-up of a business Operating losses on the Income Statement 9 Training costs incurred in the start up of a business Charge as expense on the Income Statement 10 Purchase cost of a franchise Intangible 11 Goodwill generated internally Not recorded,any costs related to creating goodwill incurred internally must be expense. 12 Cost of testing in search for product alternatives R&D expense on the Income Statement.
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13 Goodwill acquired in the purchase of a business Intangible 14 Cost of developing a patent R&D expense on the Income Statement. 15 Cost of purchasing a patent from an inventor Intangible 16 Legal costs incurred in securing a patent Intangible 17 Unrecovered costs of a successful legal suit to protect the patent* Intangible 18 Cost of conceptual formulation of possible product alternatives R&D expense on the Income Statement. 19 Cost of purchasing a copyright Intangible 20 Research and development costs R&D expense on the Income Statement. 21 Long-term receivables Long-term investments, or other assets, on the balance sheet 22 Cost of developing a trademark Expensed on te Income Statement 23 Cost of purchasing a trademark Intangible The costs of SUCCESSFULLY defending a patent or copyright are capitalized (added to the book value o the asset). If the lawsuit is unsuccessful, then we expense the legal fees and credit the asset account since we can no longer use it.
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Exercise 12-2 (Classification Issues - Intangibles) Presented below is selected account information related to Matt Perry Inc. as of December 21, 2010. All these accounts have debit balances. Instructions: Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.
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