Chap008wildtextbook

Useful life is often difficult to determine usually

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Useful life is often difficult to determine. Usually acquired for operational use. Intangible Assets Often provide exclusive rights or privileges. Intangible Assets 8-36
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o Patents o Copyrights o Leaseholds o Leasehold Improvements o Franchises & Licenses o Goodwill o Trademarks & Trade Names n Record at current cost, including purchase price, legal fees, and filing fees . n Amortization recorded over the life of the intangible asset Cost Determination and Amortization 8-37
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Types of Intangibles Patents The exclusive right granted to its owner to manufacture and sell a patented item or use a process for 20 years. A patent is generally amortized, using the straight-line method, over its useful life not to exceed 20 years. 8-38
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Types of Intangibles Copyrights The exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years. Leaseholds The rights the lessor grants to the lessee under the terms of a lease. Most leases have a determinable life. 8-39
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Types of Intangibles Leasehold Improvements A lessee may pay for alterations or improvements to the leased property such as partitions, painting, and storefronts. These costs are usually amortized over the term of the lease. Franchises and Licenses The right granted by a company or the government to deliver a product or service under specified conditions. Trademarks and Trade Names A symbol, name, phrase, or jingle identified with a company, product, or service. 8-40
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Occurs when one company buys another company. Goodwill is not amortized. It is tested each year to determine if there has been any impairment in carrying value. Goodwill Only purchased goodwill is an intangible asset. Goodwill 8-41
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Provides information about a company’s efficiency in using its assets. Total asset turnover = Net sales Average total assets Total Asset Turnover 8-42
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