Intermediate Accounting

Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Chapter 12 Intangible Assets - all with Video Answers

Educators

Chapter Questions

01:00

Problem 1

What are the two main characteristics of intangible assets?

Jennifer Stoner

Numerade Educator

01:00

Problem 2

If intangibles are acquired for stock, how is the cost of the intangible determined?

Jennifer Stoner

Numerade Educator

01:00

Problem 3

Intangibles have either a limited useful life or an indefinite useful life. How should these two different types of intangibles be amortized?

Jennifer Stoner

Numerade Educator

01:29

Problem 4

Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?

Alexander Cheng

Numerade Educator

04:20

In 2010 Ghostbusters Corp. spent $\$ 420,000$ for "goodwill" visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be reported?

Emily Brower

Numerade Educator

01:00

Problem 6

What are factors to be considered in estimating the useful life of an intangible asset?

Jennifer Stoner

Numerade Educator

01:55

Problem 7

What should be the pattern of amortization for a limitedlife intangible?

Oluwadamilola Ameobi

Numerade Educator

01:38

Problem 8

Columbia Sportswear Company acquired a trademark that is helpful in distinguishing one of its new products. The trademark is renewable every 10 years at minimal cost. All evidence indicates that this trademark product will generate cash flows for an indefinite period of time. How should this trademark be amortized?

Amisha Tiwari

Numerade Educator

01:51

Problem 9

McNabb Company spent $\$ 190,000$ developing a new process, $\$ 45,000$ in legal fees to obtain a patent, and $\$ 91,000$ to market the process that was patented, all in the year $2010 .$ How should these costs be accounted for in $2010 ?$

Jennifer Stoner

Numerade Educator

04:10

Problem 10

Izzy Inc. purchased a patent for $\$ 350,000$ which has an estimated useful life of 10 years. Its pattern of use or consumption cannot be reliably determined. Prepare the entry to record the amortization of the patent in its first year of use.

Oluwadamilola Ameobi

Numerade Educator

01:00

Problem 11

Explain the difference between artistic-related intangible assets and contract-related intangible assets.

Jennifer Stoner

Numerade Educator

01:13

Problem 12

What is goodwill? What is negative goodwill?

Kaylee Mcclellan

Numerade Educator

02:51

Problem 13

Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in order to conform with generally accepted accounting principles?

Oluwadamilola Ameobi

Numerade Educator

01:15

Problem 14

In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.

Sanchit Jain

Numerade Educator

02:17

Problem 15

Braxton Inc. is considering the write-off of a limited life intangible because of its lack of profitability. Explain to the management of Braxton how to determine whether a write-off is permitted.

Matt Bremer

Numerade Educator

09:27

Problem 16

Last year Zeno Company recorded an impairment on an intangible asset held for use. Recent appraisals indicate that the asset has increased in value. Should Zeno record this recovery in value?

Puneet Prajapati

Numerade Educator

00:40

Problem 17

Explain how losses on impaired intangible assets should be reported in income.

Kaylee Mcclellan

Numerade Educator

00:36

Problem 18

Simon Company determines that its goodwill is impaired. It finds that its implied goodwill is $\$ 360,000$ and its recorded goodwill is $\$ 400,000 .$ The fair value of its identifiable assets is $\$ 1,450,000 .$ What is the amount of goodwill impaired?

Liuxi Sun

Numerade Educator

03:08

Problem 19

What is the nature of research and development costs?

Ameer Said

Numerade Educator

01:28

Problem 20

Research and development activities may include (a) personnel costs, (b) materials and equipment costs, and (c) indirect costs. What is the recommended accounting treatment for these three types of $R \& D$ costs?

Ameer Said

Numerade Educator

04:42

Problem 21

Which of the following activities should be expensed currently as $\mathrm{R\&D}$ costs?
(a) Testing in search for or evaluation of product or process alternatives.
(b) Engineering follow-through in an early phase of commercial production.
(c) Legal work in connection with patent applications or litigation, and the sale or licensing of patents.

Puneet Prajapati

Numerade Educator

04:29

Problem 22

Indicate the proper accounting for the following items.
(a) Organization costs.
(b) Advertising costs.
(c) Operating losses.

Oluwadamilola Ameobi

Numerade Educator

02:18

Problem 23

In $2009,$ Austin Powers Corporation developed a new product that will be marketed in $2010 .$ In connection with the development of this product, the following costs were incurred in 2009 : research and development costs $\$ 400,000 ;$ materials and supplies consumed $\$ 60,000 ;$ and compensation paid to research consultants $\$ 125,000$. It is anticipated that these costs will be recovered in 2012 What is the amount of research and development costs that Austin Powers should record in 2009 as a charge to expense?

Sajin Shajee

Numerade Educator

01:07

Problem 24

Recently, a group of university students decided to incorporate for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting the business, state incorporation fees, and stamp taxes. One student wishes to charge these costs against revenue in the current period. Another wishes to defer these costs and amortize them in the future. Which student is correct?

Carson Merrill

Numerade Educator

03:16

Problem 25

An intangible asset with an estimated useful life of 30 years was acquired on January 1,2000 , for $\$ 540,000$. On January 1 $2010,$ a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estimated useful life of 30 more years from the date of the review. What is the amount of amortization for this intangible in $2010 ?$

Narayan Hari

Numerade Educator

01:00

Problem 26

Where can authoritative iGAAP guidance related to intangible assets be found?

Jennifer Stoner

Numerade Educator

01:35

Problem 27

Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for intangible assets.

Ameer Said

Numerade Educator

13:22

Problem 28

Sophia Co., a cellular phone company based in Italy, prepares its financial statements in accordance with iGAAP. In $2010,$ it reported average assets of $€ 12,500$ and net income $€ 1,125 .$ Included in net income is amortization expense of $€ 120 .$ Under U.S. GAAP, Sophia's amortization expense would have been $€ 325 .$ Briefly discuss how analysis of Sophia's 2010 return on total assets (and comparisons to a company using U.S. GAAP) would be affected by differences in intangible asset amortization between ¡GAAP and U.S. GAAP.

Md.Daniyal Arshad

Numerade Educator

01:00

Problem 29

Briefly discuss the convergence efforts that are underway in the area of intangible assets.

Jennifer Stoner

Numerade Educator

00:28

Problem 30

An article in the financial press stated, "More than half of software maker Comserve's net worth is in a pile of tapes and ring-bound books. That raises some accountants eyebrows." What is the profession's position regarding the incurrence of costs for computer software that will be sold?

Michelle Nguyen

Numerade Educator

04:18

Problem 31

Garfunkel, Inc. has incurred $\$ 6$ million in developing a computer software product for sale to third parties. Of the $\$ 6$ million costs incurred, $\$ 4.5$ million is capitalized. The product produced from this development work has generated $\$ 2$ million of revenue in 2010 and is anticipated to generate another $\$ 8$ million in future years. The estimated useful life of the project is 4 years. How much of the capitalized costs should be amortized in $2010 ?$

Luuk Verhoeven

Numerade Educator

02:21

Problem 32

In $2010,$ EZ-Learn Software developed a software package for assisting calculus instruction in business colleges, at a cost of $\$ 2,000,000 .$ Although there are tens of thousands of calculus students in the market, college instructors seem to change their minds frequently on the use of teaching aids. Not one package has yet been ordered or delivered. Prepare an argument to advocate expensing the development cost in the current year. Offer an argument for capitalizing the development cost over its estimated useful life. Which stakeholders are harmed or benefited by either approach?

Julian Wong

Numerade Educator

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