b. Black purchased a controlling interest in a vinyl flooring company. The expenditure resulted in the recording of a significant amount of goodwill. Black expects to earn above-average returns on this investment indefinitely. c. Black incurred large amounts of research and development costs in developing a dirt-resistant carpet fiber. The company expects that the fiber will be patented and that sales of the resulting products will contribute to revenue for at least 25 years. The legal life of the patent, however, will be only 20 years. d. Black made an expenditure to acquire the patent on a popular carpet cleaner. The patent had a remaining legal life of 14 years, but Black expects to produce and sell the product for only six more years. e. Black spent a large amount to sponsor the televising of the Olympic Games. Black’s intent was to make television viewers more aware of the company’s name and its product lines.
b. Black purchased a controlling interest in a vinyl flooring company. The expenditure resulted in the recording of a significant amount of goodwill. Black expects to earn above-average returns on this investment indefinitely. c. Black incurred large amounts of research and development costs in developing a dirt-resistant carpet fiber. The company expects that the fiber will be patented and that sales of the resulting products will contribute to revenue for at least 25 years. The legal life of the patent, however, will be only 20 years. d. Black made an expenditure to acquire the patent on a popular carpet cleaner. The patent had a remaining legal life of 14 years, but Black expects to produce and sell the product for only six more years. e. Black spent a large amount to sponsor the televising of the Olympic Games. Black’s intent was to make television viewers more aware of the company’s name and its product lines.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges
Section: Chapter Questions
Problem 1BD
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Question
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During the current year, Black Corporation incurred the following expenditures which should be
recorded either as operating expenses or as intangible assets and name the asset and explain why you categorize particular asset.
a. Expenditures were made for the training of new employees. The average employee remains
with the company for five years, but is trained for a new position every two years.
b. Black purchased a controlling interest in a vinyl flooring company. The expenditure resulted
in the recording of a significant amount of goodwill . Black expects to earn above-average returns on this investment indefinitely.
c. Black incurred large amounts of research and development costs in developing a dirt-resistant
carpet fiber. The company expects that the fiber will be patented and that sales of the resulting
products will contribute to revenue for at least 25 years. The legal life of the patent, however,
will be only 20 years.
d. Black made an expenditure to acquire the patent on a popular carpet cleaner. The patent had a
remaining legal life of 14 years, but Black expects to produce and sell the product for only six
more years.
e. Black spent a large amount to sponsor the televising of the Olympic Games. Black’s intent
was to make television viewers more aware of the company’s name and its product lines.
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