Question

statements. E12.2 (L01,2) (Classification Issues--Intangibles) Presented below is selected account informa- tion related to Matt Perry Inc. as of December 21, 2019. All these accounts have debit balances. Cable television franchises yes Music copyrights yes Research and development costs Goodwill yes Cash Accounts receivable Property, plant, and equipment Internet domain name yes Land Film contract rights yes Customer lists Prepaid expenses Covenants not to compete Brand names you Notes receivable Investments in associated companies Organization costs Instructions Identify which items should be classified as an intangible asset. For those items not classified as an intan- gible asset, indicate where they would be reported in the financial statements

Answer 1

Solution as per below images:

Meaning of Intangible Asset: An intangible asset is an identifiable non monetary asset without physical substance It should be recognised in the financial statements if and only if : a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and b) the cost of asset can be measured reliably. Particulars Remarks Cable Television Franchises Music Copyrights Research and Development cost Goodwill Cash Classification Of Asset (Intangible or Non Intangible) Intangible Intangible See Note no 1 & 2 below Intangible Non Intangible Account receivables Non Intangible It should be Reported as a current asset under the head cash and cash equivalents in Balance sheet It should be Reported as a current asset in Balance Sheet It should be Reported under the heading Non current assets Property, Plant and Equipment Non Intangible Internet Domain Name Land Intangible Non Intangible It should be Reported under the heading Property Plant and Equipment under Main Heading Non Current Assets Film Contract Rights Customer Lists Prepaid Expenses Intangible Intangible Non Intangible It should be Reported as a current asset under the head Short term loans and Advances Covenants not to compete Brand Names Notes Receivables Intangible Non Intangible Investment in associated companies Non Intangible It should be reported as Non current asset under the heading long term loans and Advances It should be reported as Non current asset under the heading Non Current investments It should be reported in income statement under the heading Administrative Expenses Organization costs Non Intangible

Notes: 1) Research is original and Planned investigation undertaken with the Prospect of gaining new Scientific or technical knowledge and Understanding. No intangible asset arising from research should be recognised. Expenditure on research should be recognised as an expense when it is incurred. 2) Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of Commercial production or use. Intangible assets arising from development should be recognised if and only if an entity can demonstrate all the following: a) Technical Feasiblity of Completion of intangible asset to make it available for use or sale. b) intention to complete the intangible asset c) Ability to use or sell intangible asset d) how the intangible asset will generate probable future econimic benefits e) Adequate resources to complete the development f) Ability to measure reliably the expenditure attributable to the intangible asset during its development.