During a recent management meeting, David Bryce, director of marketing, proposed that the company begin capitalizing its marketing expenditures as goodwill. In his words, “Marketing expenditures create goodwill for the company which benefit’s the company for multiple periods. Therefore it doesn’t make good sense to have to expense it as it is incurred. Besides, if we capitalize it as goodwill, we won’t have to amortize it, and this will boost reported income.” Discuss the merits of David’s proposal.
Answer to relevant QuestionsBerwik Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? Explain.Garcia Corporation uses straight-line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it acceptable to use different methods for the two purposes? What is Garcia Corporation’s ...Prepare journal entries to record these transactions: (a) Rangel Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No salvage value is received. ...Relaford Corporation purchased a piece of equipment for $50,000. It estimated an 8-year life and $2,000 salvage value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be 10 ...Here are selected 2014 transactions of Cleland Corporation.Jan. 1 Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $62,000 and had a useful life of 10 years with no salvage value. June ...
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