FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260823875
Author: PHILLIPS
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 9, Problem 11ME
To determine
To classify: The cost incurred by employees who work with the maintenance of intangible assets
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Students have asked these similar questions
The following expenditures shall be expensed
when incurred, except
O Payment in advance of delivery of goods or the rendering of services.
O Start up costs
O Advertising and promotion costs
O Business relocation or reorganization costs
Which of the following items would qualify as
an intangible asset? *
College tuition fees paid to employees who decide to enroll in an executive MBA
program while working with the company.
O Legal costs paid to intellectual property lawyers to register a patent.
O Advertising and promotion on the launch of a huge product.
Operating losses during the initial stages of the project.
Which is not considered a research and
development activity?
O Design, construction and operation of a pilot plant.
O Laboratory research aimed at discovery of new knowledge.
O Conceptual formulation and design of possible product or process.
O Routine on-going effort to refine, enrich or improve quality of existing product.
Which statement is correct concerning the amortization…
Please Help. Chapter 7 Accounting Question
Exercises -- Intangible assets (Eng)
Ex 1: Section 4.2.1. Recognition skill: basic
In April 2001 your client, Company A decided to undertake a major restructuring of its
manufacturing activities. The client currently has two factories in different towns that produce the
same products. Management has decided that production will be moved to one of the factories (Z)
and the facilities there will be upgraded in order to increase production significantly. The
remaining factory (X) will be closed.
The company has incurred the following costs:
Cost of closing factory X, including the cost of terminating some existing contracts and 1,000,000
redundancy payments for staff
Cost of feasibility study carried out by external consultants to determine the best system for factory Z
Cost of relocating key staff to the town where factory Z is located. The staff are not contracted
to remain with the company, but they are grateful for their jobs.
Cost of implementing the new system in factory Z:…
Chapter 9 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 9 - Define long-lived assets. What are the two common...Ch. 9 - Under the cost principle, what amounts should be...Ch. 9 - What is the term for recording costs as assets...Ch. 9 - 4. Waste Management, Inc., regularly incurs costs...Ch. 9 - Distinguish between ordinary repairs and...Ch. 9 - Describe the relationship between the expense...Ch. 9 - Why are different depreciation methods allowed?Ch. 9 - In computing depreciation, three values must be...Ch. 9 - Prob. 9QCh. 9 - After merging with Northwest Airlines, Delta...
Ch. 9 - A local politician claimed, to reduce the...Ch. 9 - What is an asset impairment? How is it accounted...Ch. 9 - What is book value? When equipment is sold for...Ch. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - FedEx Corporation reports the cost of its aircraft...Ch. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - (Supplement 9A) How does depletion affect the...Ch. 9 - (Supplement 9B) Over what period should an...Ch. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - A company wishes to report the highest earnings...Ch. 9 - Barber, Inc., depreciates its building on a...Ch. 9 - Thornton Industries purchased a machine on July 1...Ch. 9 - ACME. Inc., uses straight-line depreciation for...Ch. 9 - What assets should be amortized using the...Ch. 9 - Prob. 9MCCh. 9 - The Simon Company and the Allen Company each...Ch. 9 - Classifying Long-Lived Assets and Related Cost...Ch. 9 - Prob. 2MECh. 9 - Prob. 3MECh. 9 - Computing Book Value (Straight-Line Depreciation)...Ch. 9 - Computing Book Value (Units-of-Production...Ch. 9 - Computing Book Value (Double-Declining-Balance...Ch. 9 - Calculating Partial-Year Depreciation Calculate...Ch. 9 - Recording Asset Impairment Losses After recording...Ch. 9 - Recording the Disposal of a Long-Lived Asset...Ch. 9 - Reporting and Recording the Disposal of a...Ch. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Computing and Evaluating the Fixed Asset Turnover...Ch. 9 - (Supplement 9A) Recording Depletion for a Natural...Ch. 9 - Prob. 15MECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Determining Financial Statement Effects of an...Ch. 9 - Prob. 4ECh. 9 - Determining Financial Statement Effects of...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Prob. 8ECh. 9 - Demonstrating the Effect of Book Value on...Ch. 9 - Evaluating the Impact of Estimated Useful Lives of...Ch. 9 - Calculating the Impact of Estimated Useful Lives...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing and Interpreting the Fixed Asset...Ch. 9 - Computing Depreciation and Book Value for Two...Ch. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Prob. 2CPCh. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Prob. 4PBCh. 9 - Accounting for Operating Activities (Including...Ch. 9 - Prob. 1SDCCh. 9 - Prob. 2SDCCh. 9 - Ethical Decision Making: A Mini-Case Assume you...Ch. 9 - Critical Thinking: Analyzing the Effects of...Ch. 9 - Prob. 7SDCCh. 9 - Accounting for the Use and Disposal of Long-Lived...
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Similar questions
- Which of the following can be recorded as intangible assets? (i) Staff training costs which has resulted in employees acquiring technical knowledge that is valuable to the company.(ii) Brand and customers lists generated by the marketing staff which have resulted in an increase in market share of the company. Question 6 options: 1) Item (i) only. 2) Item (ii) only. Item (i) also cannot be recorded as intangible asset.Staff training costs cannot be recorded as intangible assets because the Company cannot control the economic benefits that are related to the employees' technical knowledge. e.g. employees may resign from the Company. 3) Both items. 4) None of the items.arrow_forwardDepreciation continues to be one of the most controversial, difficult, and important problem areas in accounting. Required: 1. Explain the conventional accounting concept of depreciation accounting, and discuss its conceptual merit with respect to (a) the value of the asset, (b) the amount(s) expensed, and (c) the discretion of management in selecting the method. 2. Answer the following: a. Explain the factors that should be considered when applying the conventional concept of depreciation to the determination of how the value of a newly acquired computer system should be assigned to expense for financial reporting purposes. (Ignore income tax considerations for this case.) b. What depreciation methods might be used for the computer system?arrow_forwardQuestion: FineTech Ltd. is a manufacturing company that produces electronic gadgets. During the last financial year, the company invested heavily in research and development (R&D) to enhance product innovation and competitive advantage. As a result, FineTech incurred significant R&D expenses in the process. The company is now preparing its financial statements and needs to decide whether to treat these R&D expenses as operating expenses or capitalize them as intangible assets. Explain the concept of research and development costs in accounting, the criteria for capitalization, and the implications of each accounting treatment on FineTech's financial statements and financial performance. Additionally, discuss how these accounting decisions may impact investors, creditors, and other stakeholders in their assessment of FineTech's financial position and profitability.arrow_forward
- What kinds of risks does a firm like Amazon.com face with respect to safeguarding its assets? • What types of controls do you think it already has in place to minimize these risks? Go to the firm's website and click on "Investor Relations." You'll be able to find the firm's annual report to help you answer these questions. • Are any specific controls mentioned in the annual report? • What depreciation method does Amazon use for property and equipment?arrow_forwardQuestion 37 As a specialist in the accounting of intangible assets, explain if the costs identified can be capitalized. - Tea Limited discovered that it had been manufacturing a product illegally because this product was patented and yet Bee did not have the necessary rights. Bee immediately shut down its factory and hired a firm of lawyers to act on its behalf in the acquisition of the necessary rights to manufacture this product - Legal fees of R60 000 were incurred during July 2007. The legal process was finalised on 31 July 2007, when Tea was then required to pay R900 000 to purchase the rights, including R90 000 in refundable VAT - During the July factory shut-down: - overhead costs of R50 000 were incurred; and - significant market share was lost with the result that Tea’s t total sales over August and September was R30 000 but its expenses were R60 000, resulting in a loss of R40 000 - To increase market share, Bee spent an extra R35 000 aggressively marketing their…arrow_forwardDuring the last decades it has not been unusual for the premium paid to acquire a company to be greater than the fair value of its tangible net assets. This increase in the relative proportions of intangible assets has made the accounting practices for them all the more important. During the same period many companies have spent a great deal of funds to internally develop new intangible assets such as software and brands. IAS 38 Intangible Assets prescribes the accounting treatment for intangible assets. Required: In accordance with IAS 38 Intangible Assets, discuss whether intangible assets should be recognized and if so how they should be initially recognized, and if so how they should be initially recorded and subsequently amortized in the following circumstances: 1. When they are purchased separately from other assets 2. When they are obtained as part of acquiring a business 3. When they are developed internallyarrow_forward
- Conceptual Question Identify whether or not each of the following items should be capitalized as intangible assets from the following list. Explain your reason with relevant accounting standard. Capitalised Not capitalized Employment costs of staff conducting research activities Cost of constructing a working model of a new product License purchased to permit production and sale of a product for ten yearsarrow_forwardPlant assets often require expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years. For each of the following items, indicate whether the expenditure should be capitalized or expensed in the period incurred. a. b. C. d. e. f. g. h. Improvement. Items Replacement of a minor broken part on a machine. Expenditure that increases the useful life of an existing asset. Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its salvage value. Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset's salvage value. Expenditure that increases the quality of the output of the productive asset. Improvement to a machine that increased its fair market value and its production capacity by 30% without extending the machine's useful life. Ordinary repairs. > > >arrow_forwardi need help with this question pleasearrow_forward
- Explain what impact these errors would have hadover the last year and how you will correct them so you can prepare accurate financial statements.Expenditures:• Normal repair and maintenance on the manufacturing facility were capitalized.• The cost of taxes on new equipment used in business operations was expensed.• The shipping costs on new equipment used in business operations were expensed.• The cost of a minor repair on existing equipment used in business operations was capitalized.Assets:• Land next to the production facility held for use next year as a place to build a warehouse wasdepreciated.• Land held for future resale when the value increases was classified as Property, Plant, andEquipment but not depreciated.• Equipment used in the production process was classified as an investment.arrow_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_forwardPlant assets often require expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years.For each of the following items, indicate whether the expenditure should be capitalized or expensed in the period incurred. Items (a) Improvement. select between capitalized or expensed ExpensedCapitalized (b) Replacement of a minor broken part on a machine. select between capitalized or expensed CapitalizedExpensed (c) Expenditure that increases the useful life of an existing asset. select between capitalized or expensed ExpensedCapitalized (d) Expenditure that increases the efficiency and effectiveness of a productive asset but…arrow_forward
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