F3 M7

Answer 1

Patents, copyrights, franchises, trademarks, and goodwill are all considered intangibles

Answer 2

Purchased intangible assets are capitalized and internally developed ones (research and
development costs) are expensed

Answer 3

Exception: Certain costs associated w/internally developed intangibles that are
specifically identifiable can be capitalized (ex: legal fees, costs related to
successful defense of a client, design costs of a trademark, and other direct costs
to secure an asset)

Answer 4

If an intangible has an indeterminable life, there is a yearly impairment test

Answer 5

Cost of intangible may either be determined by the FV of consideration given or by the
FV of the property acquired, whichever is more evident

Answer 6

The remainder of total amt of intangible assets paid for - costs paid for them = cost to
unidentifiable assets

Answer 7

Amortize everything that is not internally developed, is not goodwill, or does not
have an indefinite life

Answer 8

A patent is amortized over the shorter of its estimated life or remaining legal life

Answer 9

Expenses that increase useful life of an asset require an adjustment to the calc of annual
amort (ex: asset is 96k and it costs 50k to increase the useful life of the asset. The asset
has 8 more years of legal life. 96 + 50 = 146/8 = amort exp for the year)

Answer 10

Finite life intangibles are reported at costs - amort - impairment

Answer 11

Indefinite life intangibles are reported at costs - impairment

Answer 12

In franchise accounting, initial franchise fees are capitalized while continuing franchise
fees (ex: Mgt training) are expensed

Answer 13

Organizational, one-time expenses incurred in the formation of a corp aren’t capitalized
as intangible assets, they are expensed immediately (ex: introducing a new product or
service, opening a new facility, and initiating a new process in an existing facility)

Answer 14

Organizational costs for corps are treated the EXACT opposite as for franchises

Answer 15

All organizational costs and start-up costs are expensed as incurred

Answer 16

Research and development costs are expensed as incurred

Answer 17

Exceptions that must be capitalized: Materials, equip, or facilities that have alternative
future uses (depreciate over their useful life, NOT the life of the R&D project) and R&D
costs done for other firms in a contractual agreement

Answer 18

However, the depr costs for the year for the equipment w/alternative uses is included in
the R&D costs for a given year

Answer 19

Marketing research, quality control testing, legal fees to obtain a patent, and
reformulation of a chemical compound are not R&D costs

Answer 20

Consulting fees paid to outsiders for R&D costs are included in R&D exp

Answer 21

Testing in search of process or product alternatives, redesign of a product prerelease,
and costs for training/maintenance are examples of R&D costs

Answer 22

Computer software development costs are expensed and capitalized (depends on if
technological feasibility has occurred)

Answer 23

Expense costs (planning, design, coding, and testing) incurred until technological
feasibility has been established for the product (these are all R&D costs)

Answer 24

Capitalize costs (coding, testing, and producing product masters) incurred after
technological feasibility has been established up to the point the product is released for
sale (total capitalized amt / estimated economic life)

Answer 25

Technological feasibility is established upon completion of a detailed program design or
working model

Answer 26

For software development costs, money spent after the preliminary product stage is still
considered to be in the stage before technological feasibility, so the costs are expensed