Reference no: EM133020891
Question - During the current year, Fairly 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 defence suit. The patent was unsuccessfully defended.
(b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Fairly Company expected the trademark to contribute to revenue indefinitely.
(c) Fairly 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) Fairly 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. Fairly Company is very confident it will obtain this patent in the next few years.
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