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Indicate How Each of the Following Costs Should Be Recorded

Question 135

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Indicate how each of the following costs should be recorded by placing the appropriate letter (a-d) in the space provided.

Premises:
initial fee to acquire a franchise
design, construction, and testing of preproduction prototypes and models
legal costs incurred in connection with a successful patent application
laboratory research aimed at discovery of new knowledge
cost of purchased equipment that will be used in a series of R&D projects over a ten-year period
legal costs of the initial incorporation of a business
cost of a long-term lease of land containing mineral deposits
annual service fee paid to the franchiser's headquarters for administrative services rendered to the franchisee
Responses:
charged to the patent account and amortized
charged to the franchise account and amortized
charged to other appropriate asset accounts and amortized or depreciated
charged to expense when incurred

Correct Answer:

initial fee to acquire a franchise
design, construction, and testing of preproduction prototypes and models
legal costs incurred in connection with a successful patent application
laboratory research aimed at discovery of new knowledge
cost of purchased equipment that will be used in a series of R&D projects over a ten-year period
legal costs of the initial incorporation of a business
cost of a long-term lease of land containing mineral deposits
annual service fee paid to the franchiser's headquarters for administrative services rendered to the franchisee
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