Accy 112 Intangibles quiz

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SusanneS28
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Accy 112 Intangibles quiz
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2013-10-27 19:42:09
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Accy 112 Intangibles quiz
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Accy 112 Intangibles quiz
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  1. Patents Description
    • Exclusive 20 year right to manufacture a product or use a process
    • Finite Life
  2. Patents Physical acquisition costs (purchased externally, developed Internally)
    • Purchased externally: recorded at original cost which is purchase price and all other costs necessary to bring it to condition and location for intended use such as legal fees and filing fees.
    • Developed internally: R&D costs are expensed when incurred as R&D expenses. Only legal and filing fees to secure the patent are capitalized.
  3. Patents Amortization: useful Life, Residual Value & method
    The intangible assets with finite life are amortized. Their capitalized cost less any estimated residual value is allocated to periods in which the asset is expected to contribute to the company's revenue generating activities

    Useful Life: The shorter of the 20 year legal life and its estimated economic useful life

    Residual Value: intangible is usually zero

    Method: should reflect the pattern of use in generating benefits. Most use straight line
  4. Patents Impairment: Assets held and used
    • Held and used: impairment loss test should be used when book value may not be recovered
    • Step 1: recoverability test: An impairment loss is required only when book value is not recoverable (undiscounted sum of estimated future cash flows less than book value)
    • Step 2: Fair Value Test: The impairment loss is the excess of book value over fair value
    • *AN asset or group of assets classified as held and used in measured at the lower of its book value, or fair value.
  5. Patents Impairment: Impairment, For Sale
    • An asset or group of assets classified as held for sale is measured at the lower of its book value, or fair value less cost to sell.
    • An impairment loss is recognized for any write down to fair value less cost to sell.
    • This asset or group of assets are reported separately in the balance sheet and are not depreciated or amortized.
  6. Copyrights description
    • Finite Life
    • Exclusive right of protection give to a creator of a published work, such as a song, film, painting, photograph, or book
  7. Copyrights, Type of Acquisition Cost: purchased externally; developed internally
    Purchased externally: recorded at original cost which is purchase price and all other costs necessary to bring it to condition and location for intended use such as legal fees and filing fees. Developed internally: R&D costs are expensed when incurred as R&D expenses. Only legal and filing fees to secure the patent are capitalized.
  8. Copyrights - Amortization: useful Life, Residual Value & method
    • The intangible assets with finite life are amortized. Their capitalized cost less any estimated residual value is allocated to periods in which the asset is expected to contribute to the company's revenue generating activities
    • Useful Life: The shorter of the legal life (the creator's life plus 70 years) and its ext economic useful life.
    • Residual Value: intangible is usually zero
    • Method: should reflect the pattern of use in generating benefits. Most use straight line
  9. Copyright: Impairment: Assets held and used
    • Held and used: impairment loss test should be used when book value may not be recoveredStep 1: recoverability test: An impairment loss is required only when book value is not recoverable (undiscounted sum of estimated future cash flows less than book value)
    • Step 2: Fair Value Test: The impairment loss is the excess of book value over fair value
    • *AN asset or group of assets classified as held and used in measured at the lower of its book value, or fair value.
  10. Copyright: Impairment: Assets held for sale
    An asset or group of assets classified as held for sale is measured at the lower of its book value, or fair value less cost to sell.An impairment loss is recognized for any write down to fair value less cost to sell.This asset or group of assets are reported separately in the balance sheet and are not depreciated or amortized.
  11. Franchises or Licenses: Description
    • Finite Life
    • A contractual arrangement under which a franchisor grants the franchisee the exclusive right to use the franchisor's trademark or tradename and certain product rights.
  12. Franchises or Licenses: acquisition costs (purchased externally, developed Internally)
    Purchased externally: recorded at original cost which is purchase price and all other costs necessary to bring it to condition and location for intended use such as legal fees and filing fees.
  13. Franchises or Licenses: Amortization: useful Life, Residual Value & method
    • The intangible assets with finite life are amortized. Their capitalized cost less any estimated residual value is allocated to periods in which the asset is expected to contribute to the company's revenue generating activities
    • Useful Life: The specified contractual period
    • Residual Value: intangible is usually zeroMethod: should reflect the pattern of use in generating benefits. Most use straight line
  14. Franchises or Licenses: Impairment: Assets held and used
    • Held and used: impairment loss test should be used when book value may not be recovered
    • Step 1: recoverability test: An impairment loss is required only when book value is not recoverable (undiscounted sum of estimated future cash flows less than book value)
    • Step 2: Fair Value Test: The impairment loss is the excess of book value over fair value*AN asset or group of assets classified as held and used in measured at the lower of its book value, or fair value.
  15. Franchises or Licenses: Impairment: Assets held for sale
    • An asset or group of assets classified as held for sale is measured at the lower of its book value, or fair value less cost to sell.
    • An impairment loss is recognized for any write down to fair value less cost to sell.
    • This asset or group of assets are reported separately in the balance sheet and are not depreciated or amortized.
  16. Trademarks or Tradenames: Description
    Description: Exclusive right to display a word, a slogan, a symbol, or an emblem that distinctly identifies a company, product, or a service
  17. Trademarks or Tradenames: Acquisition costs; Purchased externally, developed internally
    • Purchased externally: Purchase price, legal fees, and filing fees
    • Developed internally: is not recognized in the balance sheet
  18. Trademarks or Tradenames: Amortization
    The intangible assets with indefinite life are not subject to amortization
  19. Trademarks or Tradenames: Impairment; Assets to be held and used
    • The impairment test should be performed at least once a year or more frequently if indicated.
    • If book value exceeds fair value an impairment is recognized for the difference.
  20. Trademarks or Tradenames: Impairment; Assets held for sale
    • An asset or group of assets classified as held for sale is measured at the lower of its book value, or fair value less cost to sell.
    • An impairment loss is recognized for any write down to fair value less cost to sell.
    • This asset or group of assets are reported separately in the balance sheet and are not depreciated or amortized.
  21. Goodwill: Description
    • Infinite
    • The unique value of the company as a whole over and above all identifiable assets. Goodwill will appear as an asset in a balance sheet only when it was purchased in connection with acquisition of control over another company.
  22. Goodwill: Acquisition Costs
    • Purchased externally: purchase price, legal fees, and filing fees
    • Developed internally: internally developed goodwill is not recognized in the balance sheet
  23. Goodwill: Amortization
    The intangible assets with indefinite life are not subject to amortization
  24. Goodwill: Impairment, assets to be held and used, assets held for sale
    • Goodwill should be tested for impairment at least once a year or more frequently if indicated.
    • Step 1. A loss is indicated when the fair value of reporting unit is less than its book value.
    • Step 2 An impairment loss is measure as the excess of book value over implied fair value.
  25. E 10-6 Goodwill LO10-1Prepare a summary journal entry to record the $107,000 in cash expenditures. On March 31, 2013, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities as follows:                                   
                               Book Value       Fair Value
    Current assets $6,000,000       $7,500,000 PPE                 11,000,000       14,000,000
    Other Assets     1,000,000         1,500,000 Current Liabilities4,000,000       4,000,000 
    L-Tliabilities        6,000,000       5,500,000 
                            28,000,000     33,000,000
    Required: Calculate the amount paid for goodwill.
    • Required: Calculate the amount paid for goodwill. Fair value of consideration exchanged                              $17,000,000            Less: Fair Value of
    • net assets acquired                  Assets                  $23,000,000                Less: Fair value of liabilities assumed               (9,500,000)  (13,500,000)            Goodwill                                    $3,500,000 
  26. In 2011, Alliant Corporation acquired Centerpoint Inc. For $300 million, of which $50 million was allocated to goodwill. At the end of 2013, management has provided the following information for a required goodwill impairment test:
    Fair value of Centerpoint, Inc.         $220
    Fair value of Centerpoint’s net assets (excluding goodwill)                         200
    Book value of Centerpoint’s net assets (including goodwill)                          250
    Required:1. Determine the amount of impairment loss.
    • Determination of implied goodwill: 
    • Fair value of Centerpoint, Inc.    $220 million  Fair value of Centerpoint’s net assets (excluding goodwill)                    200 million  Implied value of goodwill                                     $20 million Measurement of Impairment Loss: 
    • Book value of Centerpoint’s net assets
    • (including goodwill)                     $50 million 
    • Implied value of goodwill             $20 million  Impairment Loss                       ($30 million)
  27. Repeat requirement 1assuming the fair value of Centerpoint if $270 million.
    • 1. Determine the amount of impairment loss.
    • Determination of implied goodwill: 
    • Fair value of Centerpoint, Inc.  $270 million  Fair value of Centerpoint’s net assets (excluding goodwill)                  200 million  Implied value of goodwill           $50 million Measurement of Impairment Loss: 
    • Book value of Centerpoint’s net assets
    • (including goodwill)                   $50 million 
    • Implied value of goodwill           $50 million 
    • Impairment Loss                               0             
    • There is no impairment loss because fair value of 270 million exceeds book value of 250 million.

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