Costs associated with various intangibles of a company may either be expensed when incurred or capitalized and amortized. Such costs might be recorded in any of the following ways:
a. Charged to the patent account and amortized
b. Charged to the franchise account and amortized
c. Charged to other appropriate asset accounts and amortized or depreciated
d. Charged to expense when incurred
Required:
Indicate how each of the following costs should be recorded by placing the appropriate letter (a-d) in the space provided.
Initial fee to acquire a franchise.
Design, construction, and testing of preproduction prototypes and models.
Legal costs incurred in connection with a successful patent application.
Laboratory research aimed at discovery of new knowledge.
Cost of purchased equipment that will be used in a series of R&D projects over a ten-year period.
Legal costs of the initial incorporation of a business.
Cost of a long-term lease of land containing mineral deposits.
Annual service fee paid to the franchiser's headquarters for administrative services rendered to the franchisee.