Sanger indicates that all spoilage was related to this specific job. increasing or decreasing? Which of the following is an example of an intangible asset? Asset Types Industrial Metals purchases land, building, and equipment together for $1.2 million. An impairment is recorded for limited-life intangibles conditional on a recoverability test. Light Company acquires Photon Company by paying $25 million in cash. \end{array} Depreciation expense is constant amount each year 2. An intangible asset does not have a physical existence but it possesses a monetary value. On a personal level, tangible assets might include clothing, books, furniture, appliances - all the things that make up what we typically think of as "stuff." Types of Tangible Assets This can be contrasted with intangible assets that have no physical form such as a trademark. Total liabilities include current and non-current liabilities and can be . Explain why interest expense decreases each period. $$ These periodic payments should be capitalized as an intangible asset. For the current year, the December 31 balances for Visual Art Centers balance sheet accounts after adjusting and closing entries have been posted are given below. False. Question 15 Tangible assets are typically amortized using the straight-line method over the useful life of the asset. Patents of a drug manufacturer A long-term asset is reported on the balance sheet at its original cost plus all expenditures necessary to get the asset ready for use. Record the first interest payment. 2. What will be the amount of goodwill that Light Company would record as part of this acquisition? Assume that at the end of a project the project assets will be sold off, what is the appropriate cash flow to include at asset disposition (sold)? True Reconcile the variable costing and absorption costing net operating income figures. Intangible Personal Property: Something of individual value that cannot be touched or held. I think all 60,000 spoiled units should be considered normal." Spoiled units were sold at $4 per unit. $$ The accounting peeople say that our break-even point is 16.000 per month, but we sold only 15.000 units in July, and the income statement they prepared shows a$10.000 profit for that month. Tangible assets can typically always be bought or sold in the market . The following are illustrative examples. Types of Non-Current Assets. The research and development (R&D) team at a pharmaceutical company is developing a drug for colon cancer. True. The research and development (R&D) team at a pharmaceutical company is developing a drug for colon cancer. The legal life of a patent is _____ years. For example, a CD from your favorite artist could be physical inventory, though digital mp3 files of the same songs are intangible. \text{Issue date} & \text{ } & \text{ } & \text{ } & \text{$\$ 76,860$}\\ The fair value of the identifiable liabilities acquired is $8 million. $$ The company's Accounting Department has prepared absorption costing income statements for July and August as presented below: C . Land is an asset with an extremely long lifespan. Property taxes that relate to land already in use and that benefit only the current period are expensed; property taxes that are required to prepare land ready for its intended use are capitalized. This is calculated as [$500,000 / ($500,000 + $800,000 + $200,000)] $1.2 million. True. We record purchased intangible assets at their original cost plus all other costs, such as legal fees, necessary to get the assets ready for use. a word, slogan, or symbol that distinctively identifies a company, product, or service. 1. False The correct answer is: False Question 16 Which one is an example of intangible long-term asset? e. Recognizing advertising revenues that relate to January in December. What will be the amount of goodwill that Light Company would record as part of this acquisition? (1) True (1) The presence of material items, such as a house, car, clothing, and having money available for health care, contributes to our quality of life. The estimated residual value is $6,000, and the estimated service life is 8 years or 30,000 units. \text{Period} & \text{for Interest} & \text{Expense} & \text{Carrying Value} & \text{Value}\\ \hline To be classified as a plant asset an asset must: (1) be tangible that is capable of being seen and touched (2) have a useful service life of more than one year and (3) be used in business operations rather than held for resale. What will be the depreciation expense reported for this equipment in Year 1 if the hospital uses the straight-line method? Intangible assets Long-term assets having no physical substance that benefit their owners through providing rights and privileges. Goodwill = $3 million ($25 million purchase price $22 million fair value of net assets). The cost of an oil change for a company's delivery truck is expensed in the current period. Non-current Investments. What is the depreciation rate using activity-based depreciation? Assets such as machinery, buildings, and land used to produce products or to carry on the administrative and selling functions of a business. We capitalize an expenditure as an asset if it benefits future periods. 3. a. Goodwill is an example of a tangible asset. 1,40,000 (Depreciation provided thereon Rs. Patents, trademarks, copyrights, franchises, and goodwill are examples of the other major category of long-term assets . The owner of an established McDonald's franchise pays fees on a continuing basis to the franchisor. Light Company acquires Photon Company by paying $25 million in cash. {\text{May 10}} & {\text{Pays the full amount due to Readers.}} "Prepare a brief memo for the president, explaining what happen on the July absorption costing income statement. recovered with new profits in a reasonably short time period. True. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Daniel F Viele, David H Marshall, Wayne W McManus, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield. Accumulated Depreciation increases by an equal amount each year 3. Software Select one: a. Prime, Inc., purchases $100,000 in construction machinery on January 1, Year 1. Depreciation is the process of allocating the cost of an asset to a(n) _________ over its service life. it is part of an acquisition of another business. These 21 tangible asset examples span the six key classes of physical and measurable assets that a company can hold. Question 2 (10 points). Tangible assets Assets that have physical form. They're often how a company or organisation stays productive. The property taxes pertain to land that was acquired ten years ago. For example, you may pay a premium for a business due to its brand name or patents. Save Sales will simply return the inventory in 2019 after the financial statements have been issued. 3 million. A tangible asset is an asset that has a finite monetary value and usually a physical form. Denton Company manufactures and sells a single product. When running a family business, there are four overlapping An intangible asset is a non-physical asset that has a multi-period useful life. Just before the end of the 2018 fiscal year, a memo from the company's chief financial officer to Jim Fielding, the company controller, included the following comments: If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write down. an agreement by which governmental units or agencies grant rights to a privately owned company to use public property in performing its services. }}\\ \begin{matrix} The company began operations in 2009 and reported profits for the years 2009 through 2016. Intangible assets, on the other hand, cannot be seen . Advertisement Tangible Asset A tangible asset is physical property such as a building, land, machinery, vehicles, inventory and money. An item is said to be material if it is large enough to influence a decision. The removal of natural resources from the land. The assets may be amortized or depreciated, depending on its type. False. $$ $$ They can be short-term or long-term assets, such as cash or property. Depreciation charged during the year was Rs. A company pays $16,000 in property taxes on land that it acquired ten years ago. (a) Patents were written-off to the extent of Rs. A copyright is an artistic-related intangible asset. PPE Tangible assets held for use in production or supply of goods or services, for rental to others, or for administrative purposes and are expected to be used during more than one period . False (1) A stock certificate is an example of a tangible asset. 2. When considering total depreciation recorded over the entire life span of an asset, the method resulting in the highest total depreciation is: All three methods result in the same amount of total depreciation. Things like cash, accounts receivable, property, or equipment are all examples of tangible assets. The property taxes pertain only to the current year. False. The purchase price ($30 million) is less than the fair value of identifiable net assets acquired ($32 million = $38 million $6 million). All of the following are options for getting started as a The amount a company expects to receive from selling a long-term asset at the end of its service life is known as: The method that allocates an equal amount of depreciation to each year of an asset's service life is: The service life of an asset can be measured in units of time (such as years) or in units of activity (such as miles driven), Although the straight-line method of depreciation is the simplest to calculate, it is the least commonly used. $$ Intangible Assets. The estimated fair values of the land, buildings, and equipment are $500,000, $800,000, and $200,000, respectively. Question 3 options: True False Save \text{Total manufacturing costs} & \text{\$3,469,500}\\ Expensing a cost? Prepare a post-closing trial balance. Question 2 options: True False Save Question 3 (10 points) An income statement method of business valuation focuses more on cash flow than asset value. \text{ } & \text{May} & \text{June}\\ the allocation of the cost of intangible assets in a systematic way. $$ Discounted cash-flow analysis consists of projecting future cash Discuss the ethical dilemma faced by Jim Fielding. Goodwill, brand names, patents, customer lists What is capitalizing a cost? As natural resources are used, their cost is allocated to an expense through a process known as _____________. \text{Fixed costs per month:}\\ A tangible asset has a finite value and a physical existence. Select one: a. Tangible assets are used to assist the daily operations of a business and can be converted to cash if needed. Tangible denotes things that are physical, real and measurable. -An asset is expected to be used up in equal amounts each period of the asset's estimated useful life - (cost-residual value) x (1/useful life)= depreciation expense. Tangible assets are assets that have a clear value which can be easily measured. Horizon Corporation manufactures personal computers. the value of all favorable attributes that relate to a company over and above the cost (purchase price) of the company's identifiable tangible and intangible net assets. $$ The truck had an expected useful life of 10 years and a $5,000 salvage value. It occupies an important position in the company's balance sheet, and can shore up its overall valuations in the long term. An attorney adds an air purification system to his office building. Wasting assets originally attached to land such as mineral deposits, etc. $$ 3. $$ On January 1, Year 1, a company purchases a long-term asset having a service life of ten years. The company should record the property taxes as an expense in its current-year income statement. 3. A company pays $16,000 in property taxes on land that it acquired ten years ago. Goodwill Goodwill usually results from taking over another business or acquiring their assets. Asset to a ( n ) _________ over its service life select one: a. tangible assets can typically be. `` Prepare a brief memo for the president, explaining what happen the. And privileges statements have been issued that was acquired ten years ago is... = $ 3 million ( $ 25 million purchase price $ 22 million fair value of net assets ) of... Known as _____________ 's franchise pays fees on a recoverability test an example intangible! Asset having a service life is 8 years or 30,000 units franchise pays fees on a test! Of allocating the cost of an asset that has a finite monetary value for the 2009! 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