During the current year, Omega Products Corporation incurred the following expenditures whichshould be recorded either as operating expenses or as intangible assets:a. Expenditures were made for the training of new employees. The average employee remainswith the company for five years, but is trained for a new position every two years.b. Omega purchased a controlling interest in a wallpaper company. The expenditure resulted inrecording a significant amount of goodwill. Omega expects to earn above-average returns onthis investment indefinitely.c. Omega incurred large amounts of research and development costs in developing a superiorproduct. The company expects that it will be patented and that sales of the resulting productswill contribute to revenue for at least 40 years. The legal life of the patent, however, will be only20 years.d. Omega made an expenditure to acquire the patent on a whatsa. The patent had a remaining legallife of 10 years, but Omega expects to produce and sell the product for only four more years.e. Omega spent a large amount to sponsor the televising of the World Series. Omega’s intent wasto make television viewers more aware of the company’s name and product lines.InstructionsExplain whether each of the above expenditures should be recorded as an operating expense or anintangible asset. If you view the expenditure as an intangible asset, indicate the number of yearsover which the asset should be amortized. Explain your reasoning.
During the current year, Omega Products Corporation incurred the following expenditures which should be recorded either as operating expenses or as intangible assets: 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. Omega purchased a controlling interest in a wallpaper company. The expenditure resulted in recording a significant amount of goodwill. Omega expects to earn above-average returns on this investment indefinitely. c. Omega incurred large amounts of research and development costs in developing a superior product. The company expects that it will be patented and that sales of the resulting products will contribute to revenue for at least 40 years. The legal life of the patent, however, will be only 20 years. d. Omega made an expenditure to acquire the patent on a whatsa. The patent had a remaining legal life of 10 years, but Omega expects to produce and sell the product for only four more years. e. Omega spent a large amount to sponsor the televising of the World Series. Omega’s intent was to make television viewers more aware of the company’s name and product lines. Instructions Explain whether each of the above expenditures should be recorded as an operating expense or 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 reasoning.
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