Chapter 12, Problem 13BE

To determine

(a)

Introduction:

Patent: The patent is defined as right granted by government to an inventor to make and sell an invention for a set period.

To indicate: To indicate whether the items are capitalized or expensed in the current year.

Given information: Purchase cost of a patent from a competitor.

To determine

(b)

To indicate: To indicate whether the items are capitalized or expensed in the current year.

Given information: Research and development costs.

To determine

(c)

Introduction:

Organizational Cost: Organizational cost is cost which is incurred at the time of creating or starting up or at initial stage of the business. It includes promotional fees, legal fees, fees to the government at the time of incorporation etc.

To indicate: To indicate whether the items are capitalized or expensed in the current year.

Given information: Organizational costs.

To determine

(d)

Introduction:

Goodwill: Goodwill is a reputation of a business which cannot be easily identified or valued, but it is calculated as part of its value when it is sold.

To indicate: To indicate whether the items are capitalized or expensed in the current year.

Given information: Costs incurred internally to create goodwill.