In 2012, Sam's Salads Had the Following Expenditures Related to Developing

question 84

Essay

In 2012, Sam's Salads had the following expenditures related to developing its trademark. $\begin{array}{lr}\text { General advertising costs } & \$ 300,000 \\\text { Advertising specifically focused on trademark development } & 120,000 \\\text { Legal fees to register trademark } & 52,000 \\\text { Registration and design fees for the trademark } & 38,000 \\\text { Legal fees for successful defense of the new trademark } & 33,000\\\text { Total }&\$543,000\end{array}$ During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the trademark. Management contends that all of the costs increase the value of the trademark; therefore, all the costs should be capitalized.
1. Which of the above costs should Sam's capitalize to the Trademark account in the balance sheet?
2. Which of the above costs should Sam's report as expense in the income statement?

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Definitions:

Knowledge Acquisition

The process through which individuals or systems gather, interpret, and internalize information, transforming it into knowledge.

Knowledge Exploitation

The process of utilizing existing knowledge within an organization to create value or competitive advantage.

Perception

The process of interpreting the messages of our senses to provide order and meaning to the environment.

Threat

A threat is any circumstance or event with the potential to cause harm to a system, individual, organization, or country.