Newatit Company spent a substantial amount of money organizing and getting ready for business. These costs are considered organization costs.
a. Does the occurrence of organization costs meet the definition of assets?
b. If organization costs are assets, would they be considered intangible assets? Explain.
c. How should the cost incurred be matched against earnings under current GAAP?
d. Some theorists argue that organization costs should not be amortized. Defend this position.
According to the answer.com:
"Organization Cost is an amount spent to begin a business enterprise, such as legal fees, business filing fees, and franchise acquisition."
According to the IRIS:
It can be treated for amortization only if it meets all the following tests:
- It is for the creation of the corporation.
- It is chargeable to a capital account.
- It could be amortized over the life of the corporation if the corporation had a fixed life.
- It is incurred before the end of the first tax year in which the corporation is in business. A ...
The solution includes a sentence or two to answer each question on organizational costing with one reference.