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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

Where are gains and losses related to cash flow hedges involving anticipated transactions reported?

In what situation will the unrealized holding gain or loss on inventory be reported in income?

Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year.

Organization costs $24,000

Trademarks 15,000

Discount on bonds payable 35,000

Deposits with advertising agency for ads to promote goodwill of company 10,000

Excess of cost over fair value of net identifiable assets of acquired subsidiary 75,000

Cost of equipment acquired for research and development projects; the equipment has an alternative future use 90,000

Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years 80,000

Instructions

(a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance sheet at year-end.

(b) If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes.

Hendricks Corporation purchased trading investment bonds for \(50,000 at par. On December 31, Hendricks received an annual interest of \)2,000, and the fair value of the bonds was $47,400. Prepare Hendricks鈥� journal entries for (a) the purchase of the investment, (b) the interest received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.)

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.
See all solutions

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