Original Question: (Do not reply to this one)
What is an intangible asset? How is the cost of an intangible asset amortized? In your response, provide at least one example.
Student Discussions:
Reply to each student posts by commenting about their posts and building on the subject (About 100 words each) APA reference.
APA reference. Any sources including, but not limited:
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2017).Financial accounting theory and analysis: Text and cases(12th ed.). Hoboken, NJ: Wiley.
1-Ekaterina Cafano
Intangible assets are assets that have no physical existence. The value and the useful life of intangible assets is difficult to determine due to the nature of its existence.The examples of intangibles are copyrights, patents, franchises, goodwill, etc. Just like with tangible assets, the cost of the intangible assets must be allocated among the periods the company is getting a benefit from the asset.The company must also to account for an impairment factor that surround the tangible assets. Intangibles can be internally developed or gained outside of the company. The value of externally acquired intangibles is the cost that was incurred in order to obtain the asset. This cost should be recorded by the company and amortized over a useful life of the asset. Per SFAS 2, the cost of internally developed intangibles, such as patents are expensed in the period it incurred as part of the research and development costs. The assets that are hard to identify, such as goodwill should also be deducted from the income when incurred.
2-Dayana Alvarez
An intangible asset is a non-physical asset that has a useful life greater than one year. It is required by accounting principles that intangible assets must be reported on a company’s balance sheet at cost or less. Examples of intangible assets include brand recognition and intellectual property such as patents, trademarks, and copyrights (Accounting Tools, 2019). Since intangible assets have a limited lifespan, they are amortized and expensed over their legal lifespan. The amount that a company will amortize the intangible asset is its recorded cost less any residual value. In most cases, intangible assets won’t have any residual value, so the full amount of the asset its amortized (Accounting Tools, 2019). For example, a company records the cost of computer software on its balance sheet at $20,000 and estimates that it will have a useful life of five years with a residual value of zero. The company uses a straight-line method of amortization and divides the cost by the five-year useful life and determines that the software’s amortization amount will be $4,000 per year.