Asset retirement obligation 410000 loss on

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Asset Retirement Obligation 410000 Loss on Restoration 20000 Cash 430000
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Intangible Assets: Patent: An exclusive right to manufacture a product or process. Patents are granted for 20 years . For patents purchased, the purchase price is capitalized and expensed over the patent life. For patents internally developed simply the costs of processing the patent (legal fees, filing fees etc.) are capitalized. Copyrights: Protection given to a creator of a published work, such as books, songs, paintings, etc. Protection is for the life of the creator plus 70 years . Accounting is the same as for patents. Trademark: Exclusive right to display/use a certain word, slogan, symbol or emblem. Can be renewed indefinitely for periods of 10 years . Franchises: The franchisee pays an initial fee for the franchise which is capitalized over the franchise life. Intangible assets: Goodwill Intangible asset that cannot be directly associated with any particular right. Inseparable from the company. Appears on the financial statements from acquisitions. The purchase price at acquisition minus the fair value of net assets of the acquired company is recorded as goodwill. Goodwill acquired is not amortized but is subject to impairment over time. 6
Example 10-3: Suppose Big K purchased 8,000 shares (100 percent of shares outstanding) of Little K paying $10,000 in cash and issuing (and distributing to Little K’s shareholders) 5,000 shares with par value of $1 and total market value of $41,200. The fair value of Little K’s identifiable assets/liabilities are as follows: Cash $6,000 Accounts Payable 15,000 Accounts Receivable 9,000 Long-term Notes Payable 17,000 Inventory 8,000 Equipment 45,000 What’s the amount of goodwill Big K should recognize? What’s the journal entry?
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Intangibles: Research and Development R&D costs include labor costs, materials, depreciation and amortization of operational assets used in R&D activities, and a reasonable allocation of indirect costs related to those activities. All research and development expenses should be expensed as they are incurred. R&D costs entail a high degree of uncertainty of future benefits. It is difficult to match R&D costs with future revenues. R&D should either be reported separately on the income statement or disclosed in the footnotes. R&D costs incurred under contract for other companies are expensed against revenue from the contract. Intangibles: Software Development Costs An exception to expensing all R&D costs exists for the computer software industry. SFAS 86: All costs incurred to develop or purchase computer software to be sold, leased, or otherwise marketed are expensed as R&D costs until technological feasibility of the product has been established.

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