Acctg 201: Chapter 7 Learnsmart Questions

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Intangibles that are created by a company are referred to as what?

Internally developed intangibles

The accounting for copyrights uses the same accounting rules as what?

It uses the same rules as patents

When is goodwill recognized?

It's only recognized in a business acquisition

Service life of copyright

Life of creator plus 70 years

Copyright definition

Protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years

Goodwill definition

Recorded by the acquiring company for the amount that the purchase price exceeds the fair value of the acquired company's identifiable net assets

What is the depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life?

Straight-line method

Service life of trademark?

10 years renewable, possibly indefinite

Service life of patent

20 years

Amortization definition

The cost collection process for intangible assets

Patent definition

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

What is capitalized as an intangible asset for a franchise?

The initial payment for the franchise is considered an intangible asset

How is the depreciable cost of an asset calculated?

(Asset's cost) - (estimated residual value)

Straight line depreciation formula

(Cost-residual value)/service life

Trademark definition

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

If a company generates its own goodwill through advertising or training, how should these costs be treated?

They should expense the costs as incurred

How long are trademarks protected for?

They're protected for 10 years

Which items are capitalized into the cost of a patent?

Filing fees, purchase price, attorney fees to secure patent

What is the service life of goodwill?

Indefinite

Franchise definition

A contractual agreement 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.

Depreciation definition

Allocation of the cost of a tangible fixed asset

Depletion

Allocation of the cost of natural resources

Service life of franchise?

Contract term

Which costs are capitalized into the cost of a trademark?

Design costs, registration fees, fees for a successful legal defense

Should research and development be classified as an asset or expense?

Expense on the income statement


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