Question 1

The term "intangible assets" is used in accounting to denote

Accepted Answer

A)  current or noncurrent property items without physical characteristics. 
B)  assets with lesser economic significance because of the nature of such assets. 
C)  properties without physical characteristics that have long-term effects on a business enterprise. 
D)  such items as patents, copyrights, and claims against customers which can be valued on a monetary basis. 
A)  current or noncurrent property items without physical characteristics. 
B)  assets with lesser economic significance because of the nature of such assets. 
C)  properties without physical characteristics that have long-term effects on a business enterprise. 
D)  such items as patents, copyrights, and claims against customers which can be valued on a monetary basis.

Question 2

Lakepoint Company recently accepted a donation of land with a fair value of $200,000 from the city of Dale in return for a promise to build a plant in Dale.
The entry that Lakepoint should use to record this land is:

Accepted Answer

A)  Land.............................. 200,000 Donated Capital-Land 200,000 
B)  Land.............................. 200,000 Gain from Receipt of Donated Land 200,000 
C)  Land.............................. 200,000 Unrealized Gain from Receipt of
Donated Land.................. 200,000 
D)  Land.............................. 200,000 Retained Earnings................ 200,000 
A)  Land.............................. 200,000 Donated Capital-Land 200,000 
B)  Land.............................. 200,000 Gain from Receipt of Donated Land 200,000 
C)  Land.............................. 200,000 Unrealized Gain from Receipt of
Donated Land.................. 200,000 
D)  Land.............................. 200,000 Retained Earnings................ 200,000

Question 3

Abacus Company purchased a customer database and in-process research and development for a total of $100,000. Abacus Company uses the expected cash flow approach for estimating the fair value of these two intangibles. The appropriate interest rate is 5%. The potential future cash flows from the two intangibles, and their associated probabilities, are as follows:
Customer Database:
   
In-process Research and Development:
   
Prepare the journal entry necessary to record the purchase of the two intangibles.

Accepted Answer

Customer Database
 @#IMG-DLM& In-process

Question 4

The cost of land to be used in the operations of a business should include all of the following except

Accepted Answer

A)  commissions related to the acquisition of the land. 
B)  property taxes to the date of acquisition assumed by the purchaser. 
C)  excavation in preparation for the construction of a new building on the land. 
D)  the cost of surveys of the land. 
A)  commissions related to the acquisition of the land. 
B)  property taxes to the date of acquisition assumed by the purchaser. 
C)  excavation in preparation for the construction of a new building on the land. 
D)  the cost of surveys of the land.

Question 5

Acquired in-process research and development should be

Accepted Answer

A)  capitalized when acquired but not amortized. 
B)  capitalized when acquired and amortized over a period not to exceed 40 years. 
C)  capitalized when acquired and amortized based on the number of units of product or services sold each period. 
D)  expensed when acquired. 
A)  capitalized when acquired but not amortized. 
B)  capitalized when acquired and amortized over a period not to exceed 40 years. 
C)  capitalized when acquired and amortized based on the number of units of product or services sold each period. 
D)  expensed when acquired.

Question 6

Mozely Company borrowed $400,000 on a 10 percent note payable to finance a new warehouse Mozely is constructing for its own use. The only other debt on Mozely's books is a $600,000, 12 percent mortgage payable on an office building. At the end of the current year, average accumulated expenditures on the new warehouse totaled $475,000. Mozely should capitalize interest for the current year in the amount of

Accepted Answer

A)  $40,000. 
B)  $47,500. 
C)  $49,000. 
D)  $52,250. 
A)  $40,000. 
B)  $47,500. 
C)  $49,000. 
D)  $52,250.

Question 7

Kramer Service Corporation bought a building lot to construct a new corporate office building. An older home on the building lot was razed immediately so that the office building could be constructed. The cost of purchasing the older home should be

Accepted Answer

A)  recorded as part of the cost of the land. 
B)  written off as a loss in the year of purchase. 
C)  written off as an extraordinary item in the year of purchase. 
D)  recorded as part of the cost of the new building. 
A)  recorded as part of the cost of the land. 
B)  written off as a loss in the year of purchase. 
C)  written off as an extraordinary item in the year of purchase. 
D)  recorded as part of the cost of the new building.

Question 8

You are the auditor of Don Corporation, a newly organized company that manufactures plastic cups using an extrusion process. One of the promoters of the company was formerly involved in an enterprise that used the extrusion process and has agreed to contribute an extrusion machine to the new company in return for shares of stock of Don Corporation. What concerns would you have as the auditor of Don Corporation regarding this transaction?

Accepted Answer

This transaction represents a related pa

Question 9

Cascade Lumber shows the following balances in its financial records:
   
Prepare a partial balance sheet and income statement using the information provided above.

Accepted Answer

The answer of Cascade Lumber shows the following balances in...

Question 10

Which of the following best describes the approach prescribed in IAS 38, "Intangible Assets"?

Accepted Answer

A)  Expense all research and development costs. 
B)  Capitalize all research and development costs. 
C)  Expense all research costs and capitalize all development costs. 
D)  Capitalize all research costs and expense all development costs. 
A)  Expense all research and development costs. 
B)  Capitalize all research and development costs. 
C)  Expense all research costs and capitalize all development costs. 
D)  Capitalize all research costs and expense all development costs.

Question 11

An improvement made to a machine increased its fair market value and its production capacity by 25 percent without extending the machine's useful life. The cost of the improvement should be

Accepted Answer

A)  expensed. 
B)  debited to Accumulated Depreciation. 
C)  capitalized in the machine account. 
D)  allocated between Accumulated Depreciation and the machine account. 
A)  expensed. 
B)  debited to Accumulated Depreciation. 
C)  capitalized in the machine account. 
D)  allocated between Accumulated Depreciation and the machine account.

Question 12

UR Company purchased a customer database and a formula for a new fuel substitute for diesel fuel for a total of $100,000. UR Company uses the expected cash flow approach for estimating the fair value of these two intangibles. The appropriate interest rate is 5%. The potential future cash flows from the two intangibles, and their associated probabilities, are as follows:
Customer Database:
   
Formula:
   
Prepare the journal entry necessary to record the purchase of the two intangibles.

Accepted Answer

Customer Database
 @#IMG-DLM& Formula
 @#IMG-DLM&

Question 13

Target-Mart, Inc., is a large food-marketing company. Footnote information from the company's 2011 annual report appears below. Independent retailers use funds loaned by Target-Mart to finance the acquisition of property used in retail food operations. Target-Mart records these loans in its long-term notes receivable account. The net balance of the long-term notes receivable account at the end of 2011 is (in thousands of dollars) $36,731. The following information is available from the company's footnotes:
   Assume the following for purposes of this case:
   
Required:
Determine the market value of the assets financed by Target-Mart at the date of acquisition by the retailer (debtor).

Accepted Answer

The annual payment would be determined b

Question 14

On February 1, 2010, Reardon Corporation purchased a parcel of land as a factory site for $320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 2011. Costs incurred on the construction project are listed below.
   
Determine the cost of the land and new building.

Accepted Answer

The answer of On February 1, 2010, Reardon Corporation purchased...

Question 15

Marburg Manufacturing Company purchased a machine on January 2, 2011. The invoice price of the machine was $40,000, and the vendor offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine:
 
If the invoice is paid within the discount period, Marburg should record the acquisition cost of the machine at

Accepted Answer

A)  $41,650. 
B)  $41,100. 
C)  $40,400. 
D)  $39,200. 
A)  $41,650. 
B)  $41,100. 
C)  $40,400. 
D)  $39,200.

Question 16

Order backlogs are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Accepted Answer

A)  Marketing-related 
B)  Customer-related 
C)  Artistic-related 
D)  Contract-based 
A)  Marketing-related 
B)  Customer-related 
C)  Artistic-related 
D)  Contract-based

Question 17

According to the most current FASB standards, intangible assets acquired in a basket purchase that does not represent the acquisition of an entire business should be

Accepted Answer

A)  valued by allocating the total purchase price according to the relative fair values of all assets acquired, regardless of whether the assets are separately tradable or contract based. 
B)  valued by allocating the total purchase price according to the relative fair values only of intangible assets that are separately tradable or contract based. 
C)  valued by recording separately traded and contract based intangible assets at their individual fair values with any unallocated purchase price being recognized as goodwill. 
D)  valued by recording separately traded and contract based intangible assets at their individual fair values with any unallocated purchase price being expensed in the year of acquisition. 
A)  valued by allocating the total purchase price according to the relative fair values of all assets acquired, regardless of whether the assets are separately tradable or contract based. 
B)  valued by allocating the total purchase price according to the relative fair values only of intangible assets that are separately tradable or contract based. 
C)  valued by recording separately traded and contract based intangible assets at their individual fair values with any unallocated purchase price being recognized as goodwill. 
D)  valued by recording separately traded and contract based intangible assets at their individual fair values with any unallocated purchase price being expensed in the year of acquisition.

Question 18

A copyright is an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Accepted Answer

A)  Marketing-related 
B)  Customer-related 
C)  Artistic-related 
D)  Contract-based 
A)  Marketing-related 
B)  Customer-related 
C)  Artistic-related 
D)  Contract-based

Question 19

Which of the following most accurately describes the position taken by current generally accepted accounting principles?

Accepted Answer

A)  Both pooling of interests and the purchase method are still permitted under certain circumstances. 
B)  The valuation basis to be applied is the acquisition method under which the fair value of consideration transferred includes any contingent consideration, but excludes direct combination costs.. 
C)  The valuation basis to be applied is the cost method under which the valuation basis is the fair value of the assets and liabilities acquired including direct combination costs, but excluding contingent consideration. 
D)  The purchase method requires a business acquisition transaction to be structured to meet twelve very specific criteria required by generally accepted accounting principles. 
A)  Both pooling of interests and the purchase method are still permitted under certain circumstances. 
B)  The valuation basis to be applied is the acquisition method under which the fair value of consideration transferred includes any contingent consideration, but excludes direct combination costs.. 
C)  The valuation basis to be applied is the cost method under which the valuation basis is the fair value of the assets and liabilities acquired including direct combination costs, but excluding contingent consideration. 
D)  The purchase method requires a business acquisition transaction to be structured to meet twelve very specific criteria required by generally accepted accounting principles.

Question 20

Gooden Enterprises Inc. developed a new machine for manufacturing baseballs. Because the machine is considered very valuable, the company had it patented. The following expenditures were incurred in developing and patenting the machine.
   
Gooden elected to amortize the patent over its legal life. At the beginning of the second year, Gooden Enterprises paid $24,000 to successfully defend the patent in an infringement suit. At the beginning of the fourth year Gooden determined that the remaining estimated useful life of the patent was five years.
Record the above transactions in general journal form for Gooden Enterprises Inc. for the first five years of the life of the patent. Include any amortization or depreciation for each period.

Accepted Answer

The answer of Gooden Enterprises Inc. developed a new machine...

The term "intangible assets" is used in accounting to denote

Lakepoint Company recently accepted a donation of land with a fair value of $200,000 from the city of Dale in return for a promise to build a plant in Dale. The entry that Lakepoint should use to record this land is:

The cost of land to be used in the operations of a business should include all of the following except

Acquired in-process research and development should be

Kramer Service Corporation bought a building lot to construct a new corporate office building. An older home on the building lot was razed immediately so that the office building could be constructed. The cost of purchasing the older home should be

Cascade Lumber shows the following balances in its financial records: Prepare a partial balance sheet and income statement using the information provided above.

Which of the following best describes the approach prescribed in IAS 38, "Intangible Assets"?

An improvement made to a machine increased its fair market value and its production capacity by 25 percent without extending the machine's useful life. The cost of the improvement should be

Order backlogs are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

According to the most current FASB standards, intangible assets acquired in a basket purchase that does not represent the acquisition of an entire business should be

A copyright is an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Which of the following most accurately describes the position taken by current generally accepted accounting principles?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 10: Investments in Noncurrent Operating Assets-Acquisition

The term "intangible assets" is used in accounting to denote

Lakepoint Company recently accepted a donation of land with a fair value of $200,000 from the city of Dale in return for a promise to build a plant in Dale. The entry that Lakepoint should use to record this land is:

The cost of land to be used in the operations of a business should include all of the following except

Acquired in-process research and development should be

Kramer Service Corporation bought a building lot to construct a new corporate office building. An older home on the building lot was razed immediately so that the office building could be constructed. The cost of purchasing the older home should be

Cascade Lumber shows the following balances in its financial records: Prepare a partial balance sheet and income statement using the information provided above.

Which of the following best describes the approach prescribed in IAS 38, "Intangible Assets"?

An improvement made to a machine increased its fair market value and its production capacity by 25 percent without extending the machine's useful life. The cost of the improvement should be

Order backlogs are an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

According to the most current FASB standards, intangible assets acquired in a basket purchase that does not represent the acquisition of an entire business should be

A copyright is an example of which general category of intangible asset that should be recognized separately according to current generally accepted accounting principles?

Which of the following most accurately describes the position taken by current generally accepted accounting principles?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters