Chapter 11, Problem 5CPA

To determine

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, Goodwill, Copyrights.

Amortization:

It is the process of allocating the value of the intangible assets over its estimated useful life.

Methods of amortization:

• Percentage-of-revenue method –– Amortization is determined with the ratio of the current revenues to the current and anticipated revenues.
• Straight-line method –– Amortization is determined with the straight line percentage over the estimated life of the asset.

To Determine: The net amount Company R should report as an intangible asset-franchise.