Accounting for Intangibles

Intangible assets have unlimited life because they have no physical substance.

• True

• False

The diminishing-balance method of amortization is the most common method of amortization for intangibles.

• True

• False

A franchise is a contractual arrangement under which the franchisor grants the franchisee the right to sell certain products and/or to provide specific services

• True

• False

Goodwill CANNOT be sold individually as it is part of the business as a whole.

• True

• False

Goodwill has an indefinite life

• True

• False

Intangible assets are the rights and privileges that result from ownership of long-lived assets that:

• a. must be generated internally.

• b. are depreciable natural resources.

• c. have been exchanged at a gain.

• d. do not have physical substance.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting:

• a. Legal Expense.

• b. a Loss on Intangibles account.

• c. the Patent account.

• d. an operating expenditure account.

An asset that CANNOT be sold individually is:

• a. a patent.

• b. goodwill.

• c. a copyright.

• d. a trade name.

Which of the following is an intangible asset that has a finite life?

• a. goodwill

• b. patent

• c. trademark

• d. franchise

A patent can be renewed

• a. every twenty years.

• b. only after its economic life has been exhausted.

• c. only if significantly defended in an infringement suit.

• d. A patent can never be renewed