Intermediate Accounting 19th Edition Earl K Stice James D Stice

When it comes to studying Intermediate Accounting, the 19th edition by Earl K. Stice and James D. Stice is a comprehensive resource that covers essential topics in the field. From investments in noncurrent working property to intangible assets and goodwill, this textbook provides in-depth explanations and examples to help students grasp complex accounting concepts.

In Chapter 10 of the book, one of the topics discussed is the treatment of costs related to land purchases for constructing new buildings. For instance, when a company purchases a building lot and demolishes an older structure on the lot to make way for a new building, the cost of acquiring the older structure should be recorded as part of the cost of the land.

The book also delves into the concept of intangible assets, such as patents, copyrights, and goodwill, and how they impact a business enterprise. Understanding the attributes of intangible assets, including their exchangeability and value, is crucial for accounting students to comprehend their significance in financial reporting.

Moreover, the textbook covers topics like the accounting treatment of donated assets, valuation of plant property under deferred payment contracts, and the capitalization of interest costs incurred during asset construction. These topics are essential for students looking to build a solid foundation in accounting principles and practices.

For those studying Intermediate Accounting, the 19th edition by Earl K. Stice and James D. Stice serves as a valuable resource for gaining a deeper understanding of complex accounting topics and preparing for exams and assignments in the subject.

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### FAQ

#### Q: What topics are covered in Chapter 10 of the Intermediate Accounting 19th Edition?
A: Chapter 10 covers investments in noncurrent working property-acquisition and discusses various accounting principles related to land purchases and property development.

#### Q: How does the textbook define intangible assets?
A: Intangible assets are defined as properties without physical characteristics that have long-term effects on a business enterprise, such as patents, copyrights, and claims against customers.

#### Q: What is the significance of goodwill in a business combination?
A: Goodwill is defined as the excess of the cost over the fair value of assets acquired in a business combination, representing the value of a company’s reputation, brand, and customer relationships.

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In conclusion, the Intermediate Accounting 19th Edition by Earl K. Stice and James D. Stice provides a detailed exploration of key accounting principles and practices related to investments, intangible assets, goodwill, and asset valuation. By studying the content of this textbook, students can enhance their knowledge and skills in accounting and prepare themselves for success in the field of finance and business.Research and development (R&D) activities play a crucial role in driving innovation and growth for companies across various industries. Proper accounting for R&D costs is essential to ensure accurate financial reporting and compliance with accounting standards. Let’s delve into some key concepts and questions related to the accounting treatment of research and development costs.

### Capitalization of Interest Costs

Capitalizing interest costs is a common practice when a company borrows funds for the construction of long-term assets. In 2014, the amount of interest cost capitalized can be determined by applying the interest rate on the specific new borrowing to the average collected expenditures for the asset in 2014.

**Answer:**
The correct option to determine the interest cost capitalized in 2014 is **b. average collected expenditures for the asset in 2014**.

### Capitalization of R&D Costs

When it comes to research and development costs, certain expenses need to be capitalized and amortized over current and future periods to accurately reflect the benefits derived from these activities.

**Answer:**
The research and development-related cost that should be capitalized and amortized over current and future periods is **b. Cost of testing equipment that may also be used in another separate research and development project scheduled to begin next year**.

### Accounting for R&D Costs

The current method of accounting for research and development costs typically involves recognizing these costs as expenses when incurred.

**Answer:**
The current strategy of accounting for research and development costs is often identified as **a. Immediate recognition as an expense**.

### Treatment of Asset Costs

When a company constructs a building for research and development purposes, the cost of the building is matched against income as depreciation deducted as part of research and development costs.

**Answer:**
The cost of the laboratory building should be **b. depreciation deducted as part of research and development costs**.

**Frequently Asked Questions (FAQs):**

**Q: What is the rationale behind capitalizing certain R&D costs?**
A: Capitalizing R&D costs allows companies to spread out the expenses over the periods in which the benefits are realized, providing a more accurate representation of the costs associated with generating future revenues.

**Q: How can companies differentiate between expenses and capitalizable costs in R&D activities?**
A: Companies need to assess whether the costs incurred enhance the value of an asset beyond its original condition and provide future economic benefits. If so, these costs are typically capitalized.

**Q: What are the key considerations for accounting for interest costs during asset construction?**
A: Interest costs incurred during the construction of long-term assets must meet specific criteria to be capitalized, such as being directly attributable to the asset’s construction and incurred during the construction period.

### Conclusion

Accurately accounting for research and development costs is essential for companies to maintain transparency in financial reporting and comply with accounting standards. By understanding the principles of capitalization, expenses allocation, and asset treatment, organizations can effectively manage their R&D activities and optimize their financial performance.

In summary, proper accounting practices in research and development not only ensure regulatory compliance but also provide stakeholders with valuable insights into the company’s investment in innovation and future growth.Accounting for intangible assets can be a challenging task for businesses to navigate. The accurate valuation of intangible assets is essential for the preparation of financial statements and can impact a company’s overall financial health. In this article, we will explore various scenarios related to accounting for intangible assets, including the calculation of capitalized interest and goodwill in business transactions.

### Accounting Scenarios for Intangible Assets

1. **Purchase of Machinery with Additional Costs:**
– Broham Manufacturing Firm purchased a machine for $40,000 with additional costs of $1,200 for transportation, $700 for installation, and $550 for testing. The seller offered a 2% discount if paid within ten days. The purchase price of the machine, including additional costs, if the discount is applied, would be $41,650.

2. **Calculation of Total Intangible Assets:**
– Flybird Company’s ledger lists various accounts, including organization costs, deposits with advertising agencies, discounts on bonds payable, excess of cost over the book value of acquired subsidiaries, and trademarks. The total intangible assets to be reported on Flybird’s balance sheet as of December 31 would amount to $328,000.

3. **Recording Goodwill in Business Transactions:**
– In the scenario where Diode Inc. purchases Moore Company’s outstanding common stock, the fair value of Moore’s property, plant, and equipment exceeds its book value by $800,000. Diode would record $700,000 as goodwill on the date of purchase.

4. **Capitalized Interest on Construction Projects:**
– Place Company commences the construction of an office building and incurs $4,000,000 in total costs, with $4,000,000 incurred in 2014. The interest incurred during construction is $204,000, and the capitalized interest to be reported at December 31, 2014, would amount to $204,000.

5. **Calculation of Goodwill in Consolidated Financial Statements:**
– Mason Company acquires Turquoise Company, where Turquoise’s assets and liabilities have fair values different from book values. Due to this transaction, $350,000 would be reported as goodwill in the consolidated balance sheet of Mason Company and Turquoise Company.

6. **Interest Capitalization for Construction Projects:**
– Sonora Company borrows $400,000 at 10% interest to fund a new warehouse. With collected expenditures totaling $475,000, the interest capitalized for the current year would amount to $49,000.

### FAQ

**Q: Why is it important to accurately account for intangible assets?**
A: Accurate valuation of intangible assets is crucial for providing a true and fair view of a company’s financial position.

**Q: How can goodwill be calculated in business transactions?**
A: Goodwill is typically calculated as the excess of the purchase price over the fair value of identifiable net assets acquired.

**Q: What is capitalized interest, and why is it important?**
A: Capitalized interest is the interest incurred on funds borrowed to finance the construction of assets. It is important as it forms part of the cost of the asset in the periods in which the expenditures are incurred.

### Conclusion

Accounting for intangible assets requires a thorough understanding of the various components involved in business transactions. Proper valuation and recording of intangible assets can have a significant impact on a company’s financial statements and decision-making processes. By following accounting principles and guidelines, businesses can ensure the accuracy and reliability of their financial reporting, enhancing transparency and accountability.

By utilizing the information and scenarios outlined in this article, businesses can navigate the complexities of accounting for intangible assets more effectively and make informed financial decisions for their operations.