# How are intangible assets with an indefinite life treated? A. They are depreciated. B. They are amortized. C. They are depleted. D. They are tested yearly for impairment.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 11, Problem 11MC
Textbook Problem
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## How are intangible assets with an indefinite life treated?A. They are depreciated.B. They are amortized.C. They are depleted.D. They are tested yearly for impairment.

To determine

Introduction:

Companies may have other long-term assets used in the operations of the business that they do not intend to sell, but that does not have physical substance. These assets still provide specific rights to the owner and are called intangible assets. Examples of intangible assets are patents, copyrights, goodwill, and trademarks. To choose:

The correct option.

### Explanation of Solution

Intangibles are recorded at their acquisition cost, as are tangible assets. The costs of internally generated intangible assets, such as a patent developed through research and development, are recorded as expenses when incurred. An exception is legal costs to register or defend an intangible asset. For example, if a company incurs legal costs to defend a patent it has developed internally, the costs associated with developing the patent are recorded as an expense, but the legal costs associated with defending the patent would be capitalized as a patent intangible asset.

Amortization of intangible assets is handled differently than depreciation of tangible assets. Intangible assets are typically amortized using the straight-line method. There is typically no salvage value, as the usefulness of the asset is used up over its lifetime, and no accumulated amortization account is needed...

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