Chapter 10 - PP&E and Intangible Assets

Question 1

copyright, patents, trademarks, franchises and goodwill are examples of…

Answer 1

intangible assets

Question 2

a patent is a…

Answer 2

intangible asset

Question 3

a copyright is a

Answer 3

intangible asset

Question 4

a trademark is a

Answer 4

intangible asset

Question 5

a franchise is a

Answer 5

intangible asset

Question 6

goodwill is considered a…

Answer 6

intangible asset

Question 7

oil, gas deposits, timber tracts and mineral deposits are classified as …

Answer 7

natural resources

Question 8

office equipment, manufacturing machines, vehicles, furniture and fixtures are examples of…

Answer 8

plant, property & equipment

Question 9

T or F - sometimes companies list intangibles as part of PP&E

Answer 9

true

Question 10

expenditures for PP&E can include:

Answer 10

all expenditures ready to get the asset in condition and in the location for use

Question 11

expenditures for equipment include the cost of…

Answer 11

purchase price (less discounts)

• taxes
• transportation
• installation
• testing, trial runs
• reconditioning

Question 12

Plants, Property & Equipment definition

Answer 12

productive assets that derive their value from long-term use in operations, not resale

Question 13

land (as an asset) definition

Answer 13

real property used in operations, not land held for investment

Question 14

the cost of land used in operations can include…

Answer 14

• purchase price
• attorney fees
• title
• recording fees
• commissions
• back taxes or liens
• mortgage
• cost to clear, fill, drain or remove old buildings
• MINUS the cost of any salvaged material (e.g. sold lumber)

Question 15

what are land improvements

Answer 15

enhancements to property

e.g. parking lot, driveway, private roads, fences, landscaping or sprinklers

Question 16

the cost of buildings can include…

Answer 16

purchase price
attorney fees
agent commissions
renovations

Question 17

natural resources definition

Answer 17

productive assets that are physically consumed in operations
e.g. timber, mineral deposits, oil and gas reserves

Question 18

natural resources cost can include

Answer 18

acquisition
exploration and development
restoration costs

Question 19

what’s the life of a patent?

Answer 19

20 years

Question 20

definition of a patent

Answer 20

an exclusive right to manufacture a product or use a process

Question 21

the cost of a patent can include…

Answer 21

purchase price
legal fees
filing fees

DO NOT include internal R&D

Question 22

Trademark definition

Answer 22

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

Question 23

costs of a trademark can include…

Answer 23

purchase price
legal fees
filing fees

DOES NOT include internal R&D

Question 24

Franchise definition…

Answer 24

A contractual arrangement where you pay for the right to use a trademark, trade name or certain product rights

Question 25

the cost of a franchise can include...

Answer 25

franchise fee | any legal fees

Question 26

goodwill definition...

Answer 26

the unique value of the company as a whole over and above identifiable assets

Question 27

are training costs to train employees to use new machinery capitalized or expensed?

Answer 27

expensed. its usually difficult to quantify it, so it's expensed

Question 28

acquisition costs (natural resources)

Answer 28

the amount paid to acquire the rights to explore undiscovered natural resources

Question 29

exploration costs (natural resources)

Answer 29

cost of expenditures like drilling, excavating or searching for natural resources

Question 30

development costs (natural resources)

Answer 30

costs incurred after discovery but before production such as expenditures for tunnels, wells an shafts usually include RESTORATION COSTS

Question 31

restoration costs (natural resources)

Answer 31

asset retirement obligation the costs to restore land to original condition after the extraction of natural resources

Question 32

entry to recognize asset retirement obligation

Answer 32

dr related asset | cr asset retirement oblg

Question 33

accretion expense

Answer 33

the increase in an asset retirement obligation that accrues as an operating expense

Question 34

entry for accretion expense

Answer 34

dr accretion expense | cr asset retirement liability

Question 35

What do you do with legal and filing fees to secure an internally developed patent?

Answer 35

capitalize them

Question 36

what do you do with R&D for an internally developed patent?

Answer 36

expense

Question 37

how long is a trademark good for?

Answer 37

10 years

Question 38

how are franchise fees treated?

Answer 38

initial investment is capitalized as an intangible asset over the life of the contract annual payments on a continuing basis are expensed

Question 39

ARO stands for...

Answer 39

asset retirement obligation

Question 40

asset retirement obligations are...

Answer 40

- arise from LEGAL obligations associated with the retirement of an asset - obligation must be required during or at the end of the life of the asset e.g. filling in a fracking pond - recorded the period the asset is incurred at PV of estimated future cost

Question 41

length of a copyright

Answer 41

the life of the creator plus 70 years