Like all other non current assets intangibles are

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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 6 / Exercise 41
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
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Like all other non-current assets, intangibles are reviewed annually for impairment. Categories of Intangible AssetsMarketing-related intangible assets such as trademarks, brand names, and Internet domains.Customer-relatedintangible assets such as customer lists, habits, and relationships.Artistic-relatedintangible assets such as items protected by copyright.Contract-basedintangible assets such as licenses, franchises, and broadcast rights.Technology-basedintangibles such as both patented and unpatented technologies as well as trade secrets.TrademarkA trademarkis a distinctive name, symbol, or slogan that distinguishes a product or service from similar products or services.oThe cost of a trademark includes the purchase price, filing and registry fees, and the cost of subsequent litigation to protect rights. It does notinclude internal research and development costs.Franchises
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Applied Calculus for the Managerial, Life, and Social Sciences
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Chapter 6 / Exercise 41
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
A franchiseis the right received (usually purchased) by a business or individual to perform certain functions or sell certain products or services.oThe cost of a franchise includes expenditures made to purchase the franchise, legal fees, and other costs incurred in obtaining the franchise.GoodwillGoodwill is a residual amount, the amount of the purchase price of a business that is leftover after all other tangible and intangible assets have been identified.oGoodwill represents the miscellaneous intangible resources, factors, and conditions (e.g., reputation, functioning systems, and industry experience) that makes the company more than just a collection of assets.oIn a basket purchase, each identifiable asset is recorded at an amount equal to itsestimated fair market value; any residual is reported as goodwill.Amortization is much easier than depreciation because intangible assets are to be amortized always by the straight-line method unless there is strong justification for using another method.Some intangibles are deemed to have a perpetual life and therefore are not amortized (e.g., goodwill and most trademarks). Depletion of Natural ResourcesNatural resourcesare consumed (depleted) as the physical units representing these resources are removed and sold.Example:oLand containing copper mineral deposits is purchased at a cost of $5,500,000. After all the copper is removed, the land is expected to have a residual value of $250,000. oIt is estimated that the land holds 1,000,000 tons of copper. The company extracts 80,000 tons of copper in year 1.Depletion charge per ton = 5,500,000 – 250,000/1,000,000 tonsDepletion charge per Ton = $5.25Depletion per One Year = $5.25 x 80,000 tons = $420,000 depletion expenseChanges in Useful LifeDivide the book value by the new estimated remaining lifeChanges in Depletion(Estimated units of production)A change in accounting for natural resources occurs when the estimate of the recoverable units changes as a result of further discoveries or improved extraction processes.

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