Generally, costs incurred internally to create intangibles are A) capitalized. B) capitalized if they have an indefinite life. C) expensed as incurred. D) expensed only if they have a limited life. Solution Intangible assets lack physical existence. Unlike tangible assets such as property, plant, and equipment, intangible assets derive their value from the rights and privileges granted to the company using them. They are not financial instruments. Assets such as bank deposits, accountsreceivable, and long-term investments in bonds and stocks lack physical substance, but are not classified as intangible assets. These assets are financial instruments and derive their value from the right or claim to receive cash or cash equivalents in the future. In most cases, intangible assets provide services over a period of years. As a result, they are normally classified as long-term assets. The most common types of intangibles are patents, copyrights, franchises or licenses, trademarks or trade names, and goodwill. C) expensed as incurred. .

1. Generally, costs incurred internally to create intangibles are
A) capitalized.
B) capitalized if they have an indefinite life.
C) expensed as incurred.
D) expensed only if they have a limited life.
Solution
Intangible assets lack physical existence. Unlike tangible assets such as property, plant, and
equipment, intangible assets derive their value from the rights and privileges granted to the
company using them.
They are not financial instruments. Assets such as bank deposits, accountsreceivable, and long-
term investments in bonds and stocks lack physical substance, but are not classified as intangible
assets. These assets are financial instruments and derive their value from the right or claim to
receive cash or cash equivalents in the future.
In most cases, intangible assets provide services over a period of years. As a result, they are
normally classified as long-term assets. The most common types of intangibles are patents,
copyrights, franchises or licenses, trademarks or trade names, and goodwill.
C) expensed as incurred.