Chapter 9: Intangible Assets and Other Capitalization Issues Flashcards
Are costs related to planning and evaluation capitalized?
No they are not. They are expensed as the costs are incurred.
When is amortization recorded for an intangible asset?
When that intangible asset has a finite life.
What does R&D expenses include?
R&D performed under contract by others; design; construction, and testing of prototypes; and testing in search for new products
Royalties received should be reported as revenue
In the period earned as sales occur.
What is the method used to amortize software to be marketed (externally)?
The greater of
Revenue Method = Annual gross software revenue/total projected gross revenue x Computer software costs
S-L method = Total capitalized cost/Software estimated economic life
What is the balance sheet measurement for software to be marketed (externally)? And the related JE?
The lower of the unamortized cost or NRV
JE:
(DB) Loss on write down
(CR) Computer software costs
What is expensed verses capitalized for software to be marketed?
Expenses are incurred until the software has reached technological feasibility and that it is capitalized to point available externally, then it becomes inventory product
