Unit 3 Flashcards
Company A has recently purchased Company B. One of the terms of the sale stipulates that the current president of Company B will remain with the business for a period of three years.
Which type of intangible asset is this agreement between Company A and Company B?
Contract-related
This agreement creates a contract related intangible asset.
Which item is a primary type of patent?
Product
A product patent protects inventions.
Which treatment accurately records the legal costs of a purchased patent?
Amortized over the remaining estimated useful life of the patent
The cost is amortized over the remaining useful life beginning when the legal costs are incurred.
A company purchased a limited-life intangible asset for $1,162,500 on January 1 of Year 1. It has a useful life of 15 years.
Which amount should the balance sheet reflect for the limited-life intangible asset at the end of Year 3?
$930,000
$930,000 = $1,162,500 - ($162,500 / 15 x 3). This reflects the historical cost less three years of amortization expense.
Which cost is expensed when creating an intangible asset?
Research and development costs
Research and development costs of an intangible asset are expensed as they occur.
What is a characteristic of goodwill?
It does not carry contractual or other legal rights.
Contractual or legal rights are not part of goodwill.
A loss has occurred on an intangible asset, and the accountant uses the recoverability test to determine if there is any impairment loss.
Which intangible asset is being examined by the accountant?
a. goodwill
b. renewable license
c. trademark
d. patent
Patent on products
The recoverability test is used to determine any impairment loss on patents.
A company purchased a patent from a competitor, and there were related legal costs incurred while securing the patent.
How should these costs be charged?
To patents and amortized over the remaining useful life of the patent
These costs are capitalized as an intangible asset and amortized over the remaining useful life of the patent.
A company purchased a patent from a competitor, and there were related legal costs incurred while securing the patent.
How should these costs be charged?
To patents and amortized over the remaining useful life of the patent
These costs are capitalized as an intangible asset and amortized over the remaining useful life of the patent.
Implementing a research study to create knowledge related to a company’s product is considered a research activity. True or False?
True.
