Question: Indicate whether the following items are capitalized or expensed in the current year.

1. Purchase cost of a patent from a competitor.
2. Research costs.
3. Development costs (after achieving economic viability).
4. Organizational costs.
5. Costs incurred internally to create goodwill.

S.no.

Items

Indication

Explanation

a

The purchase cost of a patent from a competitor.

Capitalized

Generally, the cost of patents is indicated as an expense, but successful legal proceedings should be capitalized.

b

Research costs

Expensed

If there are no future advantages, research should be expensed.

c

Development cost (after achieving economic viability)

Capitalized

The cost of developing an asset for sale or use is capitalized only if it proves to be technically and economically viable.

d

Organizational costs

Expensed

Organizational expenditures should be expensed since it is difficult to predict future benefits and their relation to future revenues.

e

Costs incurred internally to create goodwill

Expensed

Expenses for establishing goodwill are included in the cost of preparing intangible assets for their intended use.