Acc551

Intermediate Accounting II

Homework week 1

E12-1 (Classification Issues—Intangibles) Presented below is a list of items that could be included in the intangible assets section of the balance sheet.

1. Investment in a subsidiary company.(Long-term investments in the balance sheet.)

2. Timberland.(Property, plant, and equipment in the balance sheet)

3. Cost of engineering activity required to advance the design of a product to the manufacturing stage. (Research and development expense in the income statement)

4. Lease prepayment (6 months’ rent paid in advance). (Current asset (prepaid rent) in the balance sheet)

5. Cost of equipment obtained. (Property, plant, and equipment in the balance sheet)

6. Cost of searching for applications of new research findings. (Research and development expense in the income statement)

7. Costs incurred in the formation of a corporation. (Charge as expense in the income statement)

8. Operating losses incurred in the start-up of a business. (Operating losses in the income statement)

9. Training costs incurred in start-up of new operation. (Charge as expense in the income statement)

10. Purchase cost of a franchise. (Intangible assets)

11. Goodwill generated internally. (Any costs related to creating goodwill incurred

Internally must be expensed)

12. Cost of testing in search for product alternatives. (Research and development expense in the income statement)

13. Goodwill acquired in the purchase of a business. (Intangible assets)

14. Cost of developing a patent. (Research and development expense in the income statement)

15. Cost of purchasing a patent from an inventor. (Intangible assets)

16. Legal costs incurred in securing a patent. (Intangible assets)

17. Unrecovered costs of a successful legal suit to protect the patent. (Intangible assets)

18. Cost of conceptual formulation of possible product alternatives. (Research and development expense in the income statement)

19. Cost of purchasing a copyright....