Asset Recognition & Valuation

A. Asset Recognition and Valuation

The transactions listed below relate to Apple Computer, a manufacturer of computer hardware and software. Indicate whether or not each transaction gives rise to an accounting asset of Apple Computer. If accounting recognizes an asset, give the account title, whether it’s a current or noncurrent asset, and the amount that will appear on the balance sheet.

1. The firm invests $8,000,000 in a government bond. The bond has a maturity value of $10,000,000 in three years.

2. The firm sends a check for $600,000 to a landlord for two months’ rent in advance on a warehouse.

3. The firm writes a check for $1,000,000 to obtain an option to purchase a building. The price of the building is $10,000,000.

4. The firm signs a four-year employment agreement with its president for $2,500,000 per year. The contract period begins next month.

5. The firm purchases a patent on a laser printer from its creator for $1,200,000.

6. The firm receives a patent on a new computer processor that it developed. Apple Computer spent $1,200,000 to develop the patented processor.