Multiple Choice
Which of the following intangible assets are typically amortized over their useful life?
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8. Long Lived Assets
Intangible Assets and Amortization
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Which of the following is properly recorded as an intangible asset?
A
A patent purchased from another company
B
Inventory held for resale
C
A company-owned delivery truck
D
Land used for company operations
Verified step by step guidance1
Understand the definition of an intangible asset: Intangible assets are non-physical assets that provide economic value to a company, such as patents, trademarks, copyrights, and goodwill.
Analyze each option provided in the question to determine whether it meets the criteria for an intangible asset. For example, a patent purchased from another company is a non-physical asset that provides future economic benefits, making it an intangible asset.
Evaluate the other options: Inventory held for resale is a physical asset classified as a current asset, not an intangible asset. A company-owned delivery truck is a tangible asset classified as property, plant, and equipment. Land used for company operations is also a tangible asset classified as property, plant, and equipment.
Conclude that the correct answer is the patent purchased from another company, as it meets the criteria for an intangible asset due to its non-physical nature and ability to provide future economic benefits.
Remember that intangible assets are recorded on the balance sheet at their acquisition cost, including any costs directly attributable to preparing the asset for use, such as legal fees or registration costs.
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