(a)
Intangible Assets: These are the long-term assets having no physical existence. However, the benefits provided by these assets are used by the company for a long period of time. Example: Patent, Trademark,
To explain: the reason for depreciating a building.
(b)
To explain: the reason for the building having zero book value but substantial fair value.
(c)
To state: some examples of intangibles found in college campus.
(d)
To give: some examples of company or product trademarks or trade names.
To explain: whether the trade names and trademarks reported on a company’s balance sheet.
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FINANCIAL ACCOUNTING>IC<
- A trademark is an intangible asset that has value to a business. Assume that you are an accountant with the responsibility of valuing the trademark of a well-known company such as Nike or McDonalds. What makes each of these companies unique and adds value? While the value of a trademark may not necessarily be recorded on the companys balance sheet, discuss what factors you think would affect (increase or decrease) the value of the companys trademark? Consider your answer through the perspective of various stakeholders.arrow_forwardDuring the current year, Alanna Co. had the following transactions pertaining to its new office building. A. What should Alanna Co. record on its books for the land? The total cost of land includes all costs of preparing the land for use. The demolition cost of the old building is added to the land costs, and the sale of the old building scrap is subtracted from the land cost. B. What should Alanna Co. record on its books for the building?arrow_forwardThe Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building. a. Organization and promotion expenses. b. Architect’s fees. c. Interest and taxes during construction. d. Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation’s books and in its annual financial statements?arrow_forward
- Which of the following is not an example of an item that would be a contingent asset? a A possible receipt of damages that is associated with a legal claim made against another entity. b A claim by a company against the State government about some land expropriated in 1997 for which the directors are of the opinion based on previous negotiations with the government that there is a strong indication of the claim being probable in the next period. c A company has started negotiations with a potential new customer and the directors are of the opinion that it is probable that there will be a sale in future periods from these negotiations. d None of the other options; all are contingent assets. 1arrow_forwardAs you have seen in Chapter 17, companies depreciate, or write off, the expense of tangible assets such as trucks and equipment over a period of their useful lives. Many companies also have intangible assets that must be accounted for as an expense over a period of time. Intangible assets are resources that benefit the company but do not have any physical substance. Some examples are copyrights, franchises, patents, trademarks, and leases. In accounting, intangible assets are written off in a procedure known as asset amortization. This is much like straight-line depreciation, but there is no salvage value. Suppose you are the accountant for a certain pharmaceutical company. In January 2000, the company purchased the patent rights for a new medication from Novae, Inc., for $18,000,000. The patent had 15 years remaining as its useful life. In January 2005, your pharmaceutical company successfully defended its right to the patent in a lawsuit that cost $630,000 in legal fees. (a) Using…arrow_forward2. If a corporation purchases land and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on A) the intention of management for the property when the building was acquired. B) the significance of the cost allocated to the building in relation to the combined cost of the land and building. C) the length of time for which the building was held prior to its demolition. D) the contemplated future use of the parking lot.arrow_forward
- Which of the following items qualify as an intangible asset under IAS 38? a- Advertising and promotion on the launch of a huge product b- .Legal costs paid to intellectual property advocates to register a patent c- .None of them d- Operating losses during the initial stages of the project.arrow_forwardThe Home Depot financial statements appear in Appendix A at the end of this textbook. Use thesestatements to answer the following questions and indicate where in the financial statements youfound the information. a. What depreciation method does Home Depot use for buildings, furniture, fixtures, and equip-ment? What are the useful lives over which these assets are depreciated? b. From the notes to Home Depot ’s financial statements, what can you learn about the company’spolicy regarding impairment of plant assets?c. Locate Home Depot ’s balance sheet and find the section entitled “Property and Equipment, atcost.” As of January 31, 2010, determine the amount of the company’s investment in propertyand equipment and the amount of depreciation taken to date on those assets. Are these assets,taken as a whole, near the beginning or end of their estimated useful lives? Explain your answer.arrow_forwardSheldon Crop wishes to use different depreciation methods for the major classes of property, plant, and equipment. What should the company do? a.The company should choose the most generally advantageous method and use that one for all classes of property, plant and equipment. b.The company should not separate plant, property and equipment into classes and therefore they should use the same depreciation method for all assets. c.The company should add notes to explain which methods are used for which classes and clearly disclose the amounts in the financial statements. d.The company should make separate financial statements for each class of property, plant and equipment in order to use different methods of depreciation.arrow_forward
- During the current year, Alanna Co. had the following transactions pertaining to its new office building. What should Alanna Co. record on its books for the land? The total cost of land includes all costs of preparing the land for use. The demolition cost of the old building is added to the land costs, and the sale of the old building scrap is subtracted from the land cost. What should Alanna Co. record on its books for the building?arrow_forwardThe IRS rule for capitalizing a purchase is if it is over $2,500. But this is not necessarily the guideline a company wants to establish. Capital assets are recorded in a “capital asset ledger” with the date of purchase, cost, depreciation method, useful life, salvage value and accumulated depreciation. Think of how a staff accountant, would write policy for a company in what type of expenditures should be capitalized and depreciated versus expensed. . Does it matter what type of company it is? How would this policy affect the balance sheet and the fixed asset ratio?arrow_forwardThe property, plant and equipment account of Cuddle PH was revisited by its property officers. They discovered that due to obsolescence, machineries with a total historical cost of P2,100,000 and accumulated depreciation of P1,750,000, will no longer provide economic benefits to the company wither from its disposal or use.Which of the following will be included in the journal entries to record the derecognition of these machineries? A. credit Accumulated Depreciation, P1,750,000 B. credit Machineries, P350,000 C. credit Loss from Derecognition, P350,000 D. credit Machineries, P2,100,000arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeBusiness Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage