The excess amount 300000 must be allocated to Truck and Building

The excess amount 300000 must be allocated to truck

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The excess amount $300,000 must be allocated to Truck and Building proportionately. Truck: [$300,000/($500,000 + $300,000)] x $300,000 = $112,500 Building: [$500,000/($500,000 + $300,000)] x $300,000 = $187,500
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Today’s Topic Overview of Intangible Assets Types of Intangible Assets Impairments Research and Development Costs
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Research and Development (R&D) Research and Development (R&D) expenditures frequently results in something that a company patents or copyrights such as New product Process / composition / or ideas Formula How should these research and development expenditures be accounted for? Generally speaking, all expenditures incurred in the research phase are expensed, but some of expenditures incurred in the development phase can be capitalized
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Research and Development (R&D) Types of R&D Costs Materials, Equipment, and Facilities Personnel Purchased intangibles Contract services Indirect costs
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Research and Development (R&D) Why R&D is so special? Long harvest period: e.g., drugs typically commercialized after 12 to 15 years of R&D High risk in terms of probability of success Low success rate: less than 25% success rate “winner takes all”: no exit value Difficult to identify whether and when there is an identifiable asset that will generate future economic benefits Difficult to determine the cost of the asset reliably. The cost of generating an intangible asset internally may not be distinguished from the cost of maintaining or enhancing the entity’s internally generated goodwill or of running day-to-day operations
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The 2017 Global Innovation 1000 study (PwC)
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37.7% of employees are working in R&D department 15.5% in 2016
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7.2% in 2016
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R&D Costs Identifying R&D Activities Research Phase Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Examples Laboratory research aimed at discovery of new knowledge; searching for applications of new research findings.; the search for alternatives for materials, devices, products, or services Development Phase Application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems, or services before the start of commercial production or use. Examples Conceptual formulation and design of possible product or process alternatives; construction of prototypes and operation of pilot plants.
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R&D Costs R&D costs are not in themselves intangible assets Research Costs must be expensed as incurred. Development costs may or may not be expensed as incurred. Capitalization begins when the project is far enough along in the process such that the economic benefits of the R&D project will flow to the company The project should be economically viable
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R&D Costs Capitalize as an intangible asset, if and only if the company can demonstrate all of the following: 1. The technical feasibility of completing the intangible asset so that it will be available for use or sale 2. Its intention to complete the intangible asset and use or sell it 3.
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  • Winter '18
  • jane smith

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