Question

Presented below is a list of items that could be included in the intangible assets section of the balance sheet. Choose the items that meet the qualifications to be treated as an intangible asset on the balance sheet.

a. Unsuccessful legal defense costs of trademark
b. Legal costs in securing copyright
c. Purchased patent
d. Investment in subsidiary
e. Filing fees for patent
f. Purchase of a franchise
g. Successful legal defense costs for copyright
h. Research costs for new drug
i. Sale of a franchise
j. Internal development costs for patent
k. Purchased copyright
l. Initial training costs for startup of new business

Answer 1

Intangible Assets:

c. Purchased patent

f. Purchase of a franchise

k. Purchased copyright

Step-by-step explanation:

Intangible assets are financial resources that have no physical properties. They must be acquired by the entity as a result of past events to be recognized. Examples of intangible assets are Brands, Goodwill, Intellectual properties (e.g. Trade Secrets, Patents, Trademark, and Copyrights), Licensing rights, Customer lists, and qualified R&D.

They are usually amortized over their estimated useful life. Annually, the entity must carry out impairment tests to determine if there is an impairment loss, especially for indefinite intangible assets which are not amortized.

The legal costs are not intangible assets on their own but can be capitalized. This means that they can be included in the affected intangible assets.