Accounting, LS 7.1

Expensed

research and development costs

Which of the following items are capitalized into the cost of a Patent?

-Filing fees -purchase price -attorney fees to secure patent

Goodwill

When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as

Goodwill may only be recognized

in a business acquisition.

A trademark registered with the U.S. Patent and Trademark Office protects the trademark from use by others for a period of

10 years

business acquisition

Business acquisition is the process of acquiring a company to build on strengths or weaknesses of the acquiring company

Copyright

Exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book.

What costs are capitalized as an intangible assest for a franchise?

Initial payment for the franchise.

The cost of successfully defending a patent should be added to

Patent

For a patent developed internally, the research and development costs are

expensed as incurred

Which of the following costs may be capitalized into the cost of a trademark?

-design cost -fees for a successful legal defense -registration fees

Gerhard Inc. recognizes goodwill related to the acquisition of another company. Gerhard should:

-periodically test goodwill for impairment -capitalize the goodwill when company is acquired.

True or False: the accounting treatment for the cost of copyrights is identical to that of the patents.

True

impaired asset

a company's asset that has a market price less than the value listed on the company's balance sheet. -Accounts that are likely to be written down are: --the company's goodwill --accounts receivable --long-term assets ----because the carrying value has a longer span of time for impairment.

Franchise

a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time.

Intangible Asset

an asset that has no physical substance

Trademark

an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service.

In a business acquisition, goodwill equals the purchase price

less the fair value of net assets acquired.

Capitalized

purchase price plus cost necessary to get asset ready for use

Patent

the exclusive legal right to manufacture a product or to use a process