During the Current Year, Penny Company Incurred Several Expenditures

question 218

Essay

During the current year, Penny Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over which the asset should be amortized. Explain your answer.
(a) Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended.
(b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Penny Company expects the trademark to contribute to revenue indefinitely.
(c) Penny Company acquires a patent for $2,000,000. The company selling the patent has spent $1,000,000 on the research and development of it. The patent has a remaining life of 15 years.
(d) Penny Company is spending considerable time and money in developing a different patent for another product. So far $3,000,000 has been spent this year on research and development. Penny Company is very confident they will obtain this patent in the next few years.

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Definitions:

Private Employment Agency

A business that helps employers find employees and vice versa, typically charging a fee for its services.

Fee Paid

The amount of money charged for a service or provided as compensation for granting a service or access to a resource.

Résumé

a document presenting an individual's background, skills, and accomplishments, typically used for securing employment.

Work Experience

The practical engagement and activities previously performed by an individual in a job or profession, contributing to their competency.