1. CHAPTER 10
Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

2. Learning Objectives
LO10-1 Identify the various costs included in the initial cost of property, plant,
and equipment, natural resources, and intangible assets.
(Exclude: Asset Retirement Obligations)
LO10-2 Determine the initial cost of individual property, plant, and equipment and intangible assets acquired as a group for a lump-sum purchase price.
LO10-3 Determine the initial cost of property, plant, and equipment and
intangible assets acquired in exchange for a deferred payment contract.
LO10-4 Determine the initial cost of property, plant, and equipment and
intangible assets acquired in exchange for equity securities, or through
donation.
LO10-5 Calculate the fixed-asset turnover ratio used by analysts to measure how effectively managers use property, plant, and equipment. (SELF-STUDY)
LO10-6 Explain how to account for dispositions and exchanges for
other nonmonetary assets (Not Covered)
LO10-7 Identify the items included in the cost of a self-constructed asset and
determine the amount of capitalized interest.
LO10-8 Explain the difference in the accounting treatment of costs incurred to
purchase intangible assets versus the costs incurred to internally develop
intangible assets (R&D).
LO10-9 Discuss the primary differences between U.S. GAAP and IFRS with
respect to the acquisition and disposition of property, plant,
and equipment and intangible assets (SELF-STUDY)

3. Long-lived, Revenue-producing Assets
Types of Assets
Long-lived, Revenue-producing Assets
Expected to Benefit Future Periods
Intangible
No Physical Substance
Tangible
Property, Plant, Equipment & Natural Resources
Long-lived, revenue-producing assets are assets that are used in the business, and that are expected to benefit the operations into the future.
There are two major categories of these assets: tangible and intangible. Tangible assets have physical substance. Included in this category are land, buildings, equipment, machinery, vehicles, and natural resources such as oil, gas, and mineral deposits. Intangible assets are assets without physical substance. Included in this category are patents, copyrights, trademarks, franchises, and goodwill.
Long-lived, revenue-producing assets may be acquired in a number of ways. Regardless of the method of acquisition, the assets are recorded at their original cost. The recorded cost includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.
General Rule for Cost Capitalization
The initial cost of an asset includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

4. Costs to be Capitalized
Land (not depreciable)
Purchase price
Real estate commissions
Attorney’s fees
Title search
Title transfer fees
Title insurance premiums
Back Taxes
Removing old buildings
Equipment
Net purchase price
Taxes
Transportation costs
Installation costs
Testing and trial runs
The costs to be capitalized for equipment include
the net purchase price, less discounts,
taxes,
transportation costs,
installation costs,
testing and trial runs.
The cost of land includes
the purchase price,
real estate commissions,
attorney’s fees,
title search,
title transfer fees,
title insurance premiums,
the cost of making the land ready for its intended use, including the cost of removing old buildings.
Unlike other long-lived, revenue-producing assets in the property, plant, and equipment category, land is not depreciated.

5. Costs to be Capitalized
Land Improvements
Separately identifiable costs of
Driveways
Parking lots
Fencing
Landscaping
Private roads
Buildings
Purchase price
Attorney’s fees
Commissions
Reconditioning
Part I.
Land improvements are enhancements to property such as driveways, parking lots, fencing, landscaping, and private roads. These are separately identifiable costs that are recorded in the land improvement asset account rather than in the land account. Unlike land, land improvements are depreciated.
Part II.
The cost of buildings includes
the purchase price,
real estate commissions,
attorney’s fees,
reconditioning costs to get the building ready for use.

6. Costs to be Capitalized
Natural Resources
Acquisition costs
Exploration costs
Development costs
Restoration costs
Intangible Assets
Patents
Copyrights
Trademarks
Franchises
Goodwill
The initial cost of an intangible asset includes the purchase price and all other costs necessary to bring it to condition and location for use, such as legal and filing fees.
The capitalized cost of natural resources includes the initial acquisition costs, exploration costs, development costs, and restoration costs.
Intangible assets include patents, copyrights, trademarks, franchises, and goodwill. The initial cost of an intangible asset includes the purchase price and all other costs necessary to bring it to condition and location for use, such as legal and filing fees.

7. Intangible Assets ─ Patents
An exclusive right recognized by law and granted by the U.S. Patent Office for 20 years.
Holder has the right to use, manufacture, or sell the patented product or process without interference or infringement by others.
R & D costs that lead to an internally developed patent are expensed in the period incurred.
Torch Inc. has developed a new device. Research and development costs totaled $30,000. Patent registration costs consisted of $2,000 in attorney fees and $1,000 in federal registration fees. What is Torch’s patent cost?
Part I.
A patent is an exclusive right to manufacture a product or to use a process that is granted by the United States Patent Office for a period of 20 years. The holder of the patent essentially has a monopoly right to use, manufacture, or sell the patented product or process without interference or infringement by others. Purchased patents are recorded at acquisition cost. Research and development costs that lead to an internally developed patent are expensed in the period incurred. Let’s consider an example dealing with patent costs.
Torch Inc. has developed a new device. Research and development costs totaled $30,000. Patent registration costs consisted of $2,000 in attorney fees and $1,000 in federal registration fees. What is Torch’s patent cost that will be recorded in the asset account?
Part II.
Torch’s cost for the new patent is $3,000. The $30,000 of research and development cost is expensed as incurred.
Torch’s cost for the new patent is $3,000. The $30,000 R & D cost is expensed as incurred.

8. Intangible Assets (SELF-STUDY)
Copyrights
A form of protection given by law to authors of literary, musical, artistic, and similar works.
Copyright owners have exclusive rights to print, reprint, copy, sell or distribute, perform, and record the work.
Generally, the legal life of a copyright is the life of the author plus 70 years.
Trademarks
A symbol, design, or logo associated with a business.
If internally developed, trademarks have no recorded asset cost.
If purchased, a trademark is recorded at cost.
Registered with U.S. Patent Office and renewable indefinitely in 10-year periods.
A copyright is an exclusive right of protection given to a creator of a published work such as literary, musical, artistic, and similar works. Copyright owners have exclusive rights to print, reprint, copy, sell or distribute, perform, and record the work. Generally, the legal life of a copyright is the life of the creator plus 70 years.
A trademark is a symbol, design, or logo that distinctively identifies a company, product, or service. If internally developed, trademarks have no recorded asset cost. If purchased, a trademark is recorded at acquisition cost. Trademarks are registered with the United States Patent Office and are renewable indefinitely in 10-year periods.

9. Intangible Assets Franchise Self-study
A contractual arrangement where the franchisor grants the franchisee exclusive rights to use the franchisor’s trademark within a certain area for a specified period of time.
A franchise is a contractual arrangement under which the franchisor grants the franchisee exclusive rights to use the franchisor’s trademark within a geographical area for a specified period of time. The franchisee usually makes an initial payment to the franchisor that is capitalized as an intangible asset along with any legal and license fees. Annual payments to the franchisor related to operations are expensed.
Unlike other intangible assets, goodwill cannot be associated with any specific right. It does not exist separate from the company itself. It represents the value of a company as a whole, over and above its identifiable net assets. Goodwill may be attributed to many factors, including good reputation, superior employees and management, good clientele, and good business location.
Only purchased goodwill is recognized. Purchased goodwill results when one company buys another company for a price that exceeds the fair value of the separate identifiable net assets acquired. Goodwill, along with other intangible assets with indefinite useful lives, is not amortized.

10. Intangible Assets -Goodwill
A unique intangible asset in that its cost cannot be directly associated with any specifically identifiable right or asset of an entity and is not separable from the company as a whole.
Represents the unique value of the company as a whole over and above all identifiable tangible and intangible assets.
The amount by which the consideration exchanged exceeds the fair value of net identifiable assets acquired.
Goodwill
Goodwill is not amortized.
Occurs when one company buys another company.
Only purchased goodwill is an intangible asset.
A franchise is a contractual arrangement under which the franchisor grants the franchisee exclusive rights to use the franchisor’s trademark within a geographical area for a specified period of time. The franchisee usually makes an initial payment to the franchisor that is capitalized as an intangible asset along with any legal and license fees. Annual payments to the franchisor related to operations are expensed.
Unlike other intangible assets, goodwill cannot be associated with any specific right. It does not exist separate from the company itself. It represents the value of a company as a whole, over and above its identifiable net assets. Goodwill may be attributed to many factors, including good reputation, superior employees and management, good clientele, and good business location.
Only purchased goodwill is recognized. Purchased goodwill results when one company buys another company for a price that exceeds the fair value of the separate identifiable net assets acquired. Goodwill, along with other intangible assets with indefinite useful lives, is not amortized.

11. Assets acquired as a group for a lump-sum purchase price
The purchase price is allocated in proportion to the relative fair values of the assets acquired.   
The Smyrna Hand & Edge Tools Company purchased an existing factory for a single sum of $2,000, The price included title to the land, the factory building, and the manufacturing equipment in the building, a patent on a process the equipment uses, and inventories of raw materials.
An independent appraisal estimated the fair values of the assets
\(if purchased separately) at $330,000 for the land, $550,000 for the building, $660,000 for the equipment, $440,000 for the patent and $220,000 for the inventories.  

12. The lump-sum purchase price of $2,000,000 is allocated to the separate assets as follows:
Fair values Land $ ,000 15% <= 330,000 / 2,200,000
Building , Equipment , Patent , Inventories ,000 10
Total $2,200, %
Journal Entry:
Land (15% x $2,000,000) 300,000 Building (25% x $2,000,000) 500,000 Equipment (30% x $2,000,000) 600,000 Patent (20% x $2,000,000) 400,000 Inventories (10% x $2,000,000) 200, Cash ,000,000

13. Noncash Acquisitions The asset acquired is recorded at
Issuance of equity securities (Ex 11)
Deferred payments (Not Covered)
Donated assets
Exchanges (Not Covered)
The asset acquired is recorded at
the fair value of the consideration given or
the fair value of the asset acquired,
whichever is more clearly evident.
Companies sometimes acquire assets without paying cash. Assets may be acquired by issuing debt or equity securities, by receiving donated assets, or by exchanging other assets.
In any noncash acquisition, the components of the transaction should be recorded at their fair values. The first indication of fair value is the fair value of the consideration given to acquire the asset. Sometimes the fair value of the asset acquired is used when that fair value is more clearly evident than the fair value of the consideration given.

14. Issuance of Equity Securities (Exercise 11)
Asset acquired is recorded at the fair value of the asset or the market value of the securities, whichever is more clearly evident.
If the securities are actively traded, market value can be easily determined.
If the securities given are not actively traded, the fair value of the asset received, as determined by appraisal, may be more clearly evident than the fair value of the securities.
Donated Assets (Exercise 11)
On occasion, companies acquire assets through donation.
The receiving company is required to record
The donated asset at fair value.
Revenue equal to the fair value of the donated asset.
When an asset is acquired with the issuance of equity securities, it is recorded at the fair value of the asset or the market value of the securities, whichever is more clearly evident. If the securities are actively traded, market value can be easily determined. If the securities given are not actively traded, the fair value of the asset received, as determined by appraisal, may be more clearly evident than the fair value of the securities.
On occasion, companies acquire assets through donation. The donation usually is an enticement to get the company to do something that benefits the donor. Donated assets are recorded at fair value with a debit on the recipient company’s books and a corresponding credit to a revenue account for the fair value of the asset. The reasoning is that the company receiving the asset is performing a service for the donor in exchange for the asset donated.

15. Exchanges (NOT COVERED)
General Valuation Principle: Cost of asset acquired is:
fair value of asset given up plus cash paid or minus cash received or
fair value of asset acquired, if it is more clearly evident
In the exchange of assets fair value is used except in rare situations in which the fair value cannot be determined or the exchange lacks commercial substance.
Property, plant, and equipment and intangible assets are sometimes acquired in exchanges for other assets. Trade-ins of old assets in exchange for new assets are probably the most frequent type of exchange. Cash is involved in the transactions to equalize fair values. The general principle to be followed is that the cost of the asset acquired is
equal to the fair value of asset given up plus cash paid or minus cash received, or
equal to the fair value of asset acquired, if that is more clearly evident.
A gain or loss is recognized for the difference between the fair value of the asset given up and its book value.
We follow the general principle based on fair value in the exchange of assets except in rare situations in which the fair value cannot be determined or the exchange lacks commercial substance.
When fair value cannot be determined or the exchange lacks commercial substance, the asset(s) acquired are valued at the book value of the asset(s) given up, plus (or minus) any cash exchanged. No gain or loss is recognized. Let’s look at an example where fair value cannot be determined.
When fair value cannot be determined or the exchange lacks commercial substance, the asset(s) acquired are valued at the book value of the asset(s) given up, plus (or minus) any cash exchanged. No gain or loss is recognized.

16. Exchange Lacks Commercial Substance(NOT COVERED)
When exchanges are recorded at fair value, any gain or loss is recognized for the difference between the fair value and book value of the asset(s) given up. To preclude the possibility of companies engaging in exchanges of appreciated assets solely to be able to recognize gains, fair value can only be used in legitimate exchanges that have commercial substance.
When exchanges are recorded at fair value, any gain or loss is recognized for the difference between the fair value and book value of the asset(s) given up. To preclude the possibility of companies engaging in exchanges of appreciated assets solely to be able to recognize gains, fair value can only be used in legitimate exchanges that have commercial substance.
A nonmonetary exchange is considered to have commercial substance if the company expects a change in future cash flows as a result of the exchange.
If the exchange does not meet this condition, it lacks commercial substance, and book value is used to value the asset(s) acquired. No gain is recognized.
A nonmonetary exchange is considered to have commercial substance if the company expects a change in future cash flows as a result of the exchange.

17. Self-Constructed Assets (Covered)
When self-constructing an asset, two accounting issues must be addressed:
Overhead allocation to the self-constructed asset.
Incremental overhead only (Hiring of New Construction Supervisor);
Full-cost approach (All overhead costs are allocated based on the relative amount of a chosen COST DRIVER (example: Labor Hours))
Proper treatment of interest incurred during construction
Under certain conditions, interest incurred on qualifying assets is capitalized.
There are two difficult accounting issues that must be addressed when a company is constructing assets for its own use:
Determining the amount of the company’s manufacturing overhead to be included in the asset’s cost.
 Deciding on the proper treatment of interest incurred during the construction period. One approach to assigning overhead to self-constructed assets is the incremental approach, where actual incremental overhead costs are recorded in the asset account. However, the most commonly used method is to assign overhead using a predetermined overhead rate, based on an overhead cost driver activity, that is used to assign the company’s overhead to regular production. This approach is called the full cost approach.
Unlike purchased assets, self-constructed assets may take a long period of time to be made ready for their intended use. The construction activities during this period require construction financing. Following our general rule for the cost of an asset, all costs necessary to make the asset ready for its intended use, including interest during the construction period, should be included in the asset’s cost.
Interest is capitalized (included in the asset’s cost) for qualifying assets. Qualifying assets are:
Assets built for a company’s own use.
Assets constructed as discrete projects for sale or lease. Assets in this category are large construction projects such as a real estate development built for sale or lease.
Only the portion of interest cost incurred during the construction period that could have been avoided if the construction had not been undertaken may be capitalized.
Asset constructed:
For a company’s own use.
As a discrete project for sale or lease.
Interest that could have been avoided if the asset were not constructed and the money used to retire debt.

18. Interest Capitalization (Covered)
Capitalization begins when
construction begins
interest is incurred, and
qualifying expenses are incurred.
Capitalization ends when
the asset is substantially complete and ready for its intended use, or
when interest costs no longer are being incurred.
The interest capitalization period begins when the first qualifying construction expenditures are incurred for materials, labor, or overhead, and when interest costs are incurred. The interest capitalization period ends when the asset is substantially complete and ready for its intended use or when interest costs no longer are being incurred.
Consider the following example of interest incurred on a self-constructed asset.

19. Interest Capitalization
Interest is capitalized based on Average Accumulated Expenditures (AAE).
Qualifying expenditures (construction labor, material, and overhead) weighted for the number of months outstanding during the current accounting period.
If the qualifying asset is financed through a specific new borrowing
If there is no specific new borrowing, and the company has other debt
Interest is capitalized based on Average Accumulated Expenditures (AAE) during the construction period. Average accumulated expenditures is an amount based on a weighted average computation of the qualifying expenditures times the number of months from the incurrence of the qualifying expenditures to the end of the construction period. Qualifying expenditures include labor, material, and overhead incurred on the construction project during the accounting period.
Interest capitalization on self-constructed assets does not require the company to borrow for the specific construction project. However, if the construction is financed through a specific new borrowing, the interest rate of the new borrowing is used for the capitalization rate.
If the construction does not require specific new borrowing, but is financed with other debt, use the weighted-average interest rate on the other debt for the capitalization rate.
. . . use the specific rate of the new borrowing as the capitalization rate.
. . . use the weighted average cost of other debt as the capitalization rate.

20. Interest Capitalization
If specific new borrowing had been insufficient to cover the average accumulated expenditures . . .
. . . Capitalize this portion using the 12 percent weighted- average cost of debt.
Other debt
If specific new borrowing had been insufficient to cover the average accumulated expenditures for the year, the portion of the average accumulated expenditures financed with specific new borrowing is capitalized using the interest rate on the specific new borrowing, and the remainder of the average accumulated expenditures is capitalized using the weighted-average interest cost of other debt excluding the specific new borrowing. This situation exists when the construction project is partially financed with specific new borrowing and partially financed with other existing debt.
. . . Capitalize this portion using the 10 percent specific borrowing rate.
AAE
Specific new
borrowing

21. INTEREST CAPITALIZATION ILLUSTRATION
On January 1, 2013, the Mills Conveying Equipment Company began construction of a building to be used as its office headquarters. The building was completed on June 30, Expenditures on the project, mainly payments to subcontractors, were as follows:
  January 3, $ 500,000
March 31, ,000
September 30, ,000
Accumulated expenditures at Dec. 31, $1,500, (before interest capitalization)  
January 31, ,000
April 30, ,000
On January 2, 2013, the company obtained a $1 million construction loan with an 8% interest rate. The loan was outstanding during the entire construction period The company’s other interest-bearing debt included two long-term notes of $2,000,000 and $4,000,000 with interest rates of 6% and 12%, respectively. Both notes were outstanding during the entire construction period.

22. INTEREST CAPITALIZATION ILLUSTRATION
2013:  Step 1: Determine the average accumulated expenditures. 
January 3, 2013 $500,000 x 12/12 = $500,000
March 31, ,000 x 9/12 = 300,000
Sept , ,000 x 3/12 = 150,000
Average accumulated expenditures for 2013 $950,000 
Step 2: Calculate the amount of interest to be capitalized. Use the construction loan rate because average accumulated expenditures is less than the specific construction loan rate. This is known as the specific interest method. 
Interest capitalized for = $950,000 x 8% = $76,000
Step 3: Compare calculated interest with actual interest incurred.
Actual Calculated Loans Rate Interest Interest
$1,000, x 8% = $ 80,000
2,000, x % = 120,000
4,000, x 12% = 480,000
$680,000 $76,000 USE THIS RATE

23. INTEREST CAPITALIZATION ILLUSTRATION
2013: The interest of $76,000 is added to the cost of the building, bringing accumulated expenditures at December 31, 2013 to $1,576,000 = ($1,500,000 + $76,000). The remaining interest cost incurred but not capitalized is expensed.

24. INTEREST CAPITALIZATION ILLUSTRATION
2014:
Step 1: Determine the average accumulated expenditures:   January 1, 2014 $1,576,000 x 6/6 = $1,576,000
January 31, ,000 x 5/6 = ,000
April 30, ,000 x 2/6 = ,000
Average accumulated expenditures for 2014 $2,176,000
Step 2: Calculate the amount of interest to be capitalized. The weighted-average interest rate on all other debt is applied to the excess of average accumulated expenditures over specific construction borrowings.
Loans Rate Interest
$2,000, x % = $120,000
4,000, x % = 480,000
$6,000,000 $600,000
  Weighted-average rate: = 10% <= 600,000 / 6,000,000

25. Interest capitalized for 2014:
Average Accumulated Annual Fraction = Interest Cost
Expenditures Rate of Year
AAE $2,176,000
Specific Borrowing 1,000,000 8% 6/12 = $40,000
Excess 1,176,000 10% 6/12 = 58,800
Capitalized Interest $98,800

26. INTEREST CAPITALIZATION ILLUSTRATION
Step 3: Compare calculated interest with actual interest incurred.
Actual Calculated
Loans Rate Interest Interest
$1,000, x 8% x 6/12 = $ 40,000
2,000, x 6% x 6/12 = ,000
4,000, x 12% x 6/12 = 240,000
$340,000 $98,800
 Use lower amount
For the first six months of 2014, $98,800 interest would be capitalized, bringing the total capitalized cost of the building to $2,574,800 = ($2,476, ,800), and $241,200 =($340, ,800) in interest would be expensed
Exercise 25

27. Research and Development (R&D) -Covered
Planned search or critical investigation aimed at discovery of new knowledge . . .
Development
The translation of research findings or other knowledge into a plan or design . . .
Most R&D costs are expensed as incurred. (Must be disclosed if material.)
In general, costs incurred before the start of commercial production are all expensed as R&D.
Research is a planned search or critical investigation aimed at discovery of new knowledge with the hope that the new knowledge will result in new, or the improvement of, existing, products, services, or processes.
Development is the translation of research findings into new, or the improvement of existing, products, services, or processes.
Most research and development costs are expensed as incurred. The costs are incurred with the intent of future benefits, but the future benefits are uncertain, and even if the benefits materialize, it is difficult to relate the benefits to revenues of future periods.
An exception to the immediate expensing of research and development costs is provided for work done under contract for other companies. These research and development costs are capitalized as inventory and carried forward into future years. Income from these contracts can be recognized using either the percentage-of-completion method or the completed contract method.
If property, plant, and equipment and intangible assets are purchased for exclusive use in research and development, the cost is expensed, regardless of the length of the assets’ useful life. If the assets have alternative future uses beyond the research and development project period, the cost should be capitalized and depreciated or amortized over the current and future periods of use.
R&D costs incurred under contract for other companies are capitalized as inventory and carried forward into future years.
Costs of assets purchased for R&D purposes are expensed in the period unless they have alternative future uses.

28. Research and Development (R&D)
| | |
Start of Start of Sale of
R&D Commercial Product
Activity Production or Process
Examples of R&D Costs: | Examples of Non-R&D Costs: |
•Laboratory research aimed at | • Engineering follow-through
discovery of new knowledge | in an early phase of commercial
| production
Searching for applications of | • Quality control during commercial
new research findings or | production including routine
other knowledge | testing of products
•Design, construction, and | • Routine ongoing efforts to
testing of preproduction | refine, enrich, or otherwise
prototypes and models | improve on the qualities of an
| existing product
•Modification of the formulation | • Adaptation of an existing
or design of a product or process | capability to a particular
| requirement or customer’s need as
| part of a continuing commercial
| activity

29. Research and Development (R&D)
Exercise 26
Exercise 27

30. Software Development Costs (Covered)
All costs incurred to establish the technological feasibility of a computer software product are treated as R&D and expensed as incurred.
Costs incurred after technological feasibility is established and before the software is available for release to customers are capitalized as an intangible asset.
Costs Expensed as R&D
All costs incurred to establish the technological feasibility of computer software products are treated as research and development costs and expensed as incurred. Costs incurred after technological feasibility is established and before the software is available for release to customers are capitalized as an intangible asset. Technological feasibility is established when all planning, designing, coding, and testing activities have been completed to determine that the software meets its design specifications including functions, features, and technical performance requirements.
Consider the following timeline to illustrate these concepts.
Costs are expensed from the start of research and development until technological feasibility is established. Costs incurred after technological feasibility is established, but before the product is released, are capitalized as an intangible asset. Costs incurred after the product is available for release to customers are treated as operating costs.
Costs Capitalized
Operating Costs
Start of R&D Activity
Technological Feasibility
Date of Product Release
Sale of Product

31. Software Development Costs (Covered)
Amortization of capitalized computer software costs starts when the product begins to be marketed.
Two methods, the percentage-of-revenue method and the straight-line method, are compared and the method producing the largest amount of amortization is used.
Balance Sheet
The unamortized portion of capitalized computer software cost is an asset.
Income Statement
Amortization expense associated with computer software cost.
R&D expense associated with computer software development cost.
EXERCISE 30
Disclosure
Amortization of capitalized computer software costs starts when the product begins to be marketed. Two methods, the percentage-of-revenue method and the straight-line method, are compared and the method producing the largest amount of amortization is used.
The periodic amortization percentage is the greater of
the ratio of current revenues to current and anticipated revenues (the percentage of revenues method) or
the straight-line percentage over the useful life of the asset (the straight-line method).
The unamortized portion of capitalized computer software cost is reported in the balance sheet as an asset. The periodic amortization expense associated with the capitalized computer software cost is reported in the income statement. The research and development expense associated with computer software development is reported in the income statement.

32. End of Chapter 10
End of Chapter 10.