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Chapter 12: Question 2E. (page 639)

Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.

Cable television franchises

Film contract rights

Music copyrights

Customer lists

Research and development costs

Prepaid expenses

Goodwill

Covenants not to compete

Cash

Brand names

Discount on notes payable

Notes receivable

Accounts receivable

Investments in affiliated companies

Property, plant, and equipment

Organization costs

Internet domain name

Land

Instructions:

Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.

Short Answer

Expert verified

Answer

There are two types of intangible assets: indeterminate and definite. A company's brand name is considered an infinite intangible asset because it stays with the firm for as long as it operates.

Step by step solution

01

The following will be classified as an intangible asset:

Cable television franchises

Film contract rights

Music copyrights

Customer lists

Goodwill

Covenants not to compete

02

Treatment for those items which are not classified as an intangible asset:

Particulars/Items

Treatment

Cash

Current assets

Accounts receivable

Current assets

Notes receivable

Current assets

Prepaid expenses

Current assets

Property, plant, and equipment

Non-current assets

Land

Non-current assets

Investments in affiliated companies

Part of investment section of the balance sheet

Research and development costs

Operating expense

Discount on notes payable

As a deduction from the related notes payable on the balance sheet

Organization costs (start-up costs)

Expense

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Most popular questions from this chapter

Question: Treasure Land Corporation incurred the following costs in 2017

Cost of laboratory research aimed at discovery of new knowledge

\(120,000

Cost of testing in search for product alternatives

\)100,000

Cost of engineering activity required to advance the design of a product to the manufacturing stage

\(210,000

\)430,000

Prepare the necessary 2017 journal entry or entries for Treasure Land.

On January 1, 2017, Dagwood Company purchased at par 6%

bonds having a maturity value of $300,000. They are dated January 1, 2017, and mature January 1, 2022, with interest received

on January 1 of each year. The bonds are classified in the held-to-maturity category.

Instructions

(a) Prepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entry to record the interest revenue on December 31, 2017.

(c) Prepare the journal entry to record the interest received on January 1, 2018.

On July 1, 2017, Wheeler Company purchased \(4,000,000 of Duggan Company鈥檚 8% bonds, due on July 1, 2024. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for \)3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income statement for the

year ended December 31, 2017.

Indicate how unrealized holding gains and losses should be reported for debt investments classified as trading, available-for-sale, and held-to-maturity.

Taylor Swift Corporation purchases a patent from Salmon Company on January 1, 2017, for $54,000. The patent has a remaining legal life of 16 years. Taylor Swift feels the patent will be useful for 10 years. Prepare Taylor Swift鈥檚 journal entries to record the purchase of the patent and 2017 amortization.
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