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Costs incurred internally to create intangibles are

a. capitalized.

b. capitalized if they have an indefinite life.

c. expensed as incurred.

d. expensed only if they have a limited life.

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Joshua Stredder
Joshua StredderLv10
1 Feb 2021
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Related questions

Instructions- fill in the blanks by searching the answer in thestandard, or answer the question (MC or TF)

Codification 985-20
Costs of software to be sold, leased, or marketed

Accounting Rules about Software

asc 985-20: Costs of Software to Be Sold, Leased, or Marketed
--> SFAS 86, August 1985
--> "Accounting for the Costs of Computer Software to Be Sold,Leased, or Otherwise Marketed"

asc 985-605: Software Revenue Recognition
--> AICPA SOP 97-2
--> "Software Revenue Recognition"

asc 350-40: Internal-Use Software
--> AICPA SOP 98-1
--> "Accounting for the Costs of Computer Software Developed orObtained for Internal Use"

Two points on the timeline, use these to answer some of thequestions below:
(A) When the technological feasibility is established
(B) When the product is available for general release tocustomers

Costs of software to be sold prior to/up to(A)

Expensed

Capitalized

2. After (A) up to (B)

a. capitalized

b. expensed


3. After (B)

expense

capitalize

Costs of purchased software
1. Software that has alternative future use
a. capitalized

b.expensed


2. Software without alternative future use
a. treated same as internal development costs

b.expensed

c. capitalized and tested for impairment

Morty Enterprises, is a new start-up company. Morty Enterpriseshas been preparing to begin operations for the past six months andis almost ready to start production. It has incurred significantcosts but no revenue has yet to be earned. Organization costs suchas legal fees and advertising have been capitalized as start-upcosts. Morty Enterprises has expensed all payroll expenses, rent,and other similar costs as incurred—this has resulted in asignificant loss being reported on the first year’s financialstatements. Is Morty’s accounting treatment in accordance withGAAP?

This is an essay question, please answer it as detailed aspossible. Thank you!

Early in January 2010, Tellco, Inc. acquired a new machine andincurred $100,000 of interest, installation , and overhead coststhat should have been capitalized but were expensed. The companyearned net operating income of $1,000,000 on average total assetsof $8,000,000 for 2010. Assume that the total cost of the newmachine will be depreciated over 10years using the straight-linemethod.

A. Calculate the ROI for Tellco, Inc for 2010
b. Calculate the ROI for Tellco, Inc for 2010 assuming that the$100,000 had been capitalized and depreciated over 10 years usingthe straight-line method.
c. Given your answers to a and b, why would the company want toaccount for the expediture as an expense?
d. Assuming that the $100,000 is capitalized, what will be theeffect on ROI for 2011 and subsequent years, compared to expensingthe interest, installation, and overhead costs in 2010? Explainyour answer.

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