Explain the difference between artistic-related intangible assets and contract-related intangible assets.
The distinction between artistic-related intangible assets and contract-related intangible assets is that copyrights protect artistic-related assets, but contract-related assets represent the value of rights arising from contractual agreements.
Ownership rights to plays, photos, photographs, and video and audiovisual content are examples of artistic intangible assets. Copyrights safeguard these ownership rights.
These are the worth of rights arising from contractual agreements. Examples are franchise and license agreements, building permissions, broadcast rights, and service or supply contracts.
Merck and Johnson & Johnson
Question: Merck & Co., Inc. and Johnson & Johnson are two leading producers of healthcare products. Each has considerable assets, and each expends considerable funds each year toward the development of new products. The development of a new healthcare product is often very expensive, and risky. New products frequently must undergo considerable testing before approval for distribution to the public. For example, it took Johnson & Johnson 4 years and $200 million to develop its 1-DAY ACUVUE contact lenses. Below are some basic data compiled from the financial statements of these two companies.
(all dollars in millions)
Johnson & Johnson
Research and development expense
On January 1, 2017, Dagwood Company purchased at par 6%
bonds having a maturity value of $300,000. They are dated January 1, 2017, and mature January 1, 2022, with interest received
on January 1 of each year. The bonds are classified in the held-to-maturity category.
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare the journal entry to record the interest revenue on December 31, 2017.
(c) Prepare the journal entry to record the interest received on January 1, 2018.
Garfield Company purchased, on January 1, 2017, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used.
In 2016, Austin Powers Corporation developed a new product that will be marketed in 2017. In connection with the development of this product, the following costs were incurred in 2016: research and development costs $400,000, materials and supplies consumed $60,000, and compensation paid to research consultants $125,000. It is anticipated that these costs will be recovered in 2019. What is the amount of research and development costs that Austin Powers should record in 2016 as a charge to expense?
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