Question

In the following TBS, you are to complete various tasks related to accounting for intangible assets. All information necessary to do your work is provided. Metro Co. lists several items in the spreadsheet below. In the second column indicate whether the item is an intangible asset and how it is classified by clicking on the related cell in that column and selecting from the options provided in the popup list. In the third column indicate the appropriate capitalization of related expenditures for the item. In the fourth column, select the appropriate choice for amortization. In the last column select the appropriate choice for recognizing impairment losses. Each solution choice from the options popup lists may be used once, more than once, or not at all. Item Classification Capitalization Amortization Trademark Customer list Copyright Franchise (initial fee) Software development Research and development Patent Goodwill

Answer 1

S. No.	Item	Classification	Capitalization	Amoirtization	Impairment
1	Trademark	Definite or Indefinite Life Intangible	Only expenditures made to external parties	Depends on whether definite or indefinite life	Depends on whether definite or indefinite life
2	Customer list	Definite Life Intangible	Only expenditures made to external parties	Amortize	Recoverable Cost test
3	Copyright	Definite Life Intangible	Only expenditures made to external parties	Amortize	Fair value test
4	Franchise (initial fee)	Definite Life Intangible	Only expenditures made to external parties	Amortize	Recoverable Cost test
5	Software development	Definite Life Intangible	Only expenditures beyond technological feasibility	Amortize expenditures beyond technological feasibility	Fair value test
6	Research and Development	Part definite life intangible, part not intangible (Research expense is always written off In Income statement whereas Development expenses are capitalized if the recognition criteria is met)	Only expenditures beyond technological feasibility	Amortize expenditures beyond technological feasibility	Net realizable value test for capitalized amount
7	Patent	Definite Life Intangible	Only expenditures made to external parties	Amortize	Fair value test
8	Goodwill	Indefinite Life Intangible	No expenditures (Only acquired goodwill in Business combinations is allowed to be capitalized)	Do not amortize	Fair value test