Exam 12: Intangibles

The Hui Company incurred the following expenditures in January 2010: (1)research and development costs of $210, 000 that resulted in a new product that was patented near year-end, (2)$6, 000 in legal fees to have the patent registered, (3)$90, 000 in advertising costs to develop a trademark for the newly patented product, (4)Legal fees of $8, 000 incurred with the registration of the trademark, and (5)$18, 000 of advertising costs to promote its good name.Benefits to be derived from the patent are expected to last for five years.The president believes the promotion of Hui's good name will benefit the firm for three years.How much amortization expense should Hui recognize for 2010?

Certain activities are listed below. Required: List by letter the activities that would be considered in determining R&D costs.

Which of the following characteristics is not common to both tangible and intangible assets?

In March of 2010, Xeon Corp.applied for a trade name.Legal costs associated with the application were $25, 000.At the time of filing the application, the company projected extra annual income to be generated through having the trade name to be $100, 000.On Feb.5, 2012, the company incurred $20, 000 in an unsuccessful defense of the trade name. Required:

Costs for which of the following activities should not be included in research and development (R&D)?

Which of the following is not a characteristic of an intangible asset which distinguishes it from a tangible asset?

Based on GAAP, most software production costs are likely to be

The Cougar Company was formed in early 2010.At the time of formation, Cougar spent the following amounts: accounting fees, $4, 000; legal fees, $8, 000; stock certificate costs, $3, 000; initial franchise fee, $10, 000; initial lease payment, $5, 000; promotional fees, $3, 000.Cougar intends to capitalize and amortize intangibles over the maximum allowable period in accordance with generally accepted accounting principles.Based on this strategy, what is Cougar's expense associated with organization costs in 2010?

The Walters Company made the following expenditures for research and development early in 2010: $40, 000 for materials, $50, 000 for contract services, $40, 000 for employee salaries, and $400, 000 for a building with an expected life of 20 years to be used for current and future research projects.Walters uses straight-line depreciation.The company allocated $10, 000 in overhead to research and development.What is Walters' research and development expense for 2010?

A patent is amortized over its expected useful life or 20 years.The expected useful life can be impacted by all of the following except

GAAP requires that research and development costs be

A Company registered a patent on January 1, 2010.B Company purchased the patent from A Company for $450, 000 on January 1, 2015, and began to amortize the patent over its remaining legal life.In early 2016, B Company determined that the patent's economic benefits would last only until the end of 2021.What amount should B Company record for patent amortization in 2016?

Smith Corporation is interested in acquiring Dawson Company and has obtained the following information about Dawson: Daws on's net income has averaged $\$ 180,000$ for the past five years. This average is expected to continue in perpetuity The book value of Dawson's recorded net ass ets is $\$ 600,000$ Dawson owns a fully depreciated building with a market value of $\$ 150,000$ . Dawson has title to a patent with a market value of $\$ 40,000$ , which is not included in Dawson's recorded net as sets. The market value of Dawson's recorded net assets(excluding $c$ and $d$ above) is $\$ 1,000,000$ . In evaluating the Dawson data, Smith believes that a 12% discount rate is appropriate. Required: Calculate each of the following and provide all necessary computations to support your a. Based on the information provided, what price shoudd Smith be willing to pay to acquire Dawson? b. What portion of the puchase price should Smith capitalize as purchased goodwill?

Young Co.received a patent on a new type of machine.The legal costs and the patent application costs totaled $80, 000.R&D costs incurred to create the machine were $120, 000.In the year in which the company received the patent, $20, 000 was spent in the successful defense of a patent infringement suit. Required: At what amount should the patent be capitalized?

The Jared Corporation is contemplating the acquisition of the Jonathan Company.Jared believes that Jonathan has goodwill, but Jared is not clear as to how to determine a value of Jonathan Company's goodwill. Required: Describe briefly the series of steps that should be used by Jared Corporation in calculating an estimate of the value of Jonathan Company's goodwill.

Listed below is a series of statements about various costs associated with intangibles. Required: Indicate whether each of these costs should be expensed (E)or capitalized (C)in the space provided.

Which of the following statements concerning intangibles is true?