Below are several intangible assets. a. A firm purchased a famous luxury good’s brand name for…

Below are several intangible assets. a. A firm purchased a famous luxury good’s brand name for $50,000,000. The firm has the exclusive right to use this name forever. b. Over the years, by consistently promoting its products’ excellent features and high quality, a firm developed a reputation that is extremely high and sought-after in the luxury goods market. This year the firm spent $40,000,000 advertising its brand in top-tier fashion magazines and at the top fashion shows around the world. c. A firm bought for $5,000,000 the right to use a song from a world-famous band as part of a product’s promotion strategy. It has the exclusive right to use the song forever. The firm plans to run the advertising campaign for two years. The product’s life cycle is conservatively estimated to be four years. d. A firm bought a patent for a drug for $60,000,000. The patent is good for 10 more years. The drug will likely command a large market share for six years and then other, newer drugs may make the drug redundant. Required: For each case suggest whether the item should be amortized. If amortization is recommended, what is the useful life that it should be amortized over? Provide justification for your recommendation.

 

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