Question

True/False

1. ____ Typically, intangible assets are shown at their fair value.
2. ____ A patent is an example of an intangible asset.
3. ____ Amortization of intangibles is usually done over the asset’s legal life.
4. ____ Once a company records goodwill, it will be on the company’s books
forever because it is not amortized.
5. ____ If an intangible asset is successfully defended from a legal challenge,
legal costs may be capitalized to the asset account.
6. ____ When one company acquires another, the acquiring company should
continue to report any intangible assets of the purchased company at the
same cost used by the purchased company.
7. ____ An intangible asset is a right that helps the owner generate revenues.
8. ____ Research and development costs that help develop successful programs
can be capitalized.
9. ____ It is assumed that payments made on a long-term basis include interest.
10. ____ Intangibles purchased from another company are reported at the
amount paid for them less any amortization.

Answer 1

Answer 1 : False

Intangible assets are typically nonphysical assets used for the long-term. Proper valuation and accounting of intangible assets are often problematic, due in large part to how intangible assets are handled. Also, the useful life of an intangible asset can be either identifiable or non-identifiable. Most intangible assets are long-term assets meaning they have a useful life of more than a year.When intangible assets have an identifiable value, they appear on a company's balance sheet as long-term assets valued according to their purchase prices and amortization schedules.

Answer 2 : True

Examples of intangible assets that are as follows:

• Patents
• Trademarks
• Franchises or licensing agreements
• Goodwill
• Copyrights
• A company's brand

Answer 3 : True

Intangible assets have a useful life that are either identifiable or indefinite. Intangible assets with identifiable useful lives are amortized on a straight-line basis over the assets legal life, which ever is shorter.

Answer 4 : False

Every year the value of goodwill is evaluated by the business that owns it. The company determine the present value of all of the future revenues of the business segment associated with the goodwill. If the present value of those revenues equal or exceed the value of the business segment’s carrying value, or its total assets (including goodwill) minus assets, the business does not make any changes.

Answer 5 : True

Since If a company incurs a legal costs to defend an intangible asset, that costs is capitalized and increase the value of the intangible. However On the other hand, if a company is unsuccessful in defending an intangible asset, the intangible is worthless and the company is required to write it off.

Answer 6 : True

Answer 7 - True

Answer 8 : True

Reseach & Development cost is an investment in the long-term cash flow generation of the company, and as such it should be capitalized, not expensed

Answer 9 : True

Answer 10 : True

Amortization of intangibles is the process of expensing the cost of an intangible asset over the projected life of the asset. The amortization process for corporate accounting purposes may differ from the amount of amortization posted for tax purposes.