Assume U.S. GAAP (generally accepted accounting principles) applies unless other

Question

Assume U.S. GAAP (generally accepted accounting principles) applies unless
otherwise noted.

During late December 2008 Company A acquires a small competitor, Company
B. During the evaluation of the acquisition it is determined that the customer lists
of Company B have a fair value of $50,000. Company A has spent $15,000
during the year updating and maintaining its own customer lists. What will be the
value of the customer list intangible asset on Company A’s 31 December 2008
consolidated financial statements?

A. $15,000.
B. $50,000.
C. $65,000.

Explanation / Answer

The purchased customer list is an identifiable intangible because it can be sold

separately from the company and it would be recorded at its fair market value, the

amount paid for it in the acquisition, $50,000. The amount spent by Company A

on its own lists, $15,000, would have to be expensed because internally generated

intangibles are not capitalized.

B is correct

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