Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

In the context of adjusting journal entries and prepaid expenses, in-process research and development (IPR&D) acquired in a business combination is:

Expensed immediately as incurred.

Deferred as a prepaid expense and amortized over its useful life.

Recorded as goodwill and not separately identified.

Recognized as an intangible asset at fair value on the acquisition date.

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Verified step by step guidance

Understand the concept of in-process research and development (IPR&D): IPR&D refers to research and development projects that are incomplete at the time of acquisition in a business combination. These projects have potential future economic benefits.

Review the accounting treatment for IPR&D: According to accounting standards, IPR&D acquired in a business combination is recognized as an intangible asset at its fair value on the acquisition date. This is because it meets the criteria for recognition as an asset, including probable future economic benefits and reliable measurement.

Clarify why IPR&D is not expensed immediately: Unlike regular R&D expenses, IPR&D acquired in a business combination is treated differently because it is part of the acquisition cost and has measurable fair value. Expensing it immediately would not align with the principles of recognizing assets in a business combination.

Explain why IPR&D is not deferred as a prepaid expense: Prepaid expenses are typically short-term assets that represent payments made in advance for goods or services. IPR&D does not fit this definition, as it is an intangible asset with potential long-term benefits.

Discuss why IPR&D is not recorded as goodwill: Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. Since IPR&D can be separately identified and measured at fair value, it is recognized as an intangible asset rather than being included in goodwill.