Question 1

The cost of purchased patents should be amortized over the remaining legal life of the patent.

Accepted Answer

A) True 
 B)False  False

Question 2

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

Accepted Answer

A) True 
 B)False  True

Question 3

The intangible asset goodwill may be

Accepted Answer

A) capitalized only when purchased. 
B) capitalized either when purchased or created internally. 
C) capitalized only when created internally. 
D) written off directly to retained earnings. 
A) capitalized only when purchased. 
B) capitalized either when purchased or created internally. 
C) capitalized only when created internally. 
D) written off directly to retained earnings. A

Question 4

General Products Company bought Special Products Division in 2006 and appropriately booked $250,000 of goodwill related to the purchase.On December 31, 2007, the fair value of Special Products Division is $2,000,000 and it is carried on General Product's books for a total of $1,700,000, including the goodwill.An analysis of Special Products Division's assets indicates that goodwill of $200,000 exists on December 31, 2007.What goodwill impairment should be recognized by General Products in 2007?

Accepted Answer

A) $0. 
B) $200,000. 
C) $50,000. 
D) $300,000. 
A) $0. 
B) $200,000. 
C) $50,000. 
D) $300,000.

Question 5

Factors considered in determining an intangible asset's useful life include all of the following except

Accepted Answer

A) the expected use of the asset. 
B) any legal or contractual provisions that may limit the useful life. 
C) any provisions for renewal or extension of the asset's legal life 
D) the amortization method used. 
A) the expected use of the asset. 
B) any legal or contractual provisions that may limit the useful life. 
C) any provisions for renewal or extension of the asset's legal life 
D) the amortization method used.

Question 6

Twilight Corporation acquired End-of-the-World Products on January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as a result of that purchase.At December 31, 2008, the End-of-the-World Products Division had a fair value of $1,700,000.The net identifiable assets of the Division (excluding goodwill) had a fair value of $1,450,000 at that time.What amount of loss on impairment of goodwill should Twilight record in 2008?

Accepted Answer

A) $ -0- 
B) $125,000 
C) $175,000 
D) $300,000 
A) $ -0- 
B) $125,000 
C) $175,000 
D) $300,000

Question 7

During 2007, Bond Company purchased the net assets of May Corporation for $950,000.On the date of the transaction, May had $300,000 of liabilities.The fair value of May's assets when acquired were as follows: $\begin{array}{ll}
\text { Current assets } & \$ 540,000 \
\text { Noncurrent assets } & {1,260,000}\&{\$ 1800,000}
\end{array}$ How should the $550,000 difference between the fair value of the net assets acquired ($1,500,000) and the cost ($950,000) be accounted for by Bond?

Accepted Answer

A) The $550,000 difference should be credited to retained earnings. 
B) The $550,000 difference should be recognized as an extraordinary gain. 
C) The current assets should be recorded at $375,000 and the noncurrent assets should be recorded at $875,000. 
D) A deferred credit of $550,000 should be set up and then amortized to income over a period not to exceed forty years. 
A) The $550,000 difference should be credited to retained earnings. 
B) The $550,000 difference should be recognized as an extraordinary gain. 
C) The current assets should be recorded at $375,000 and the noncurrent assets should be recorded at $875,000. 
D) A deferred credit of $550,000 should be set up and then amortized to income over a period not to exceed forty years.

Question 8

Under current accounting practice, intangible assets are classified as

Accepted Answer

A) amortizable or unamortizable. 
B) limited-life or indefinite-life. 
C) specifically identifiable or goodwill-type. 
D) legally restricted or goodwill-type. 
A) amortizable or unamortizable. 
B) limited-life or indefinite-life. 
C) specifically identifiable or goodwill-type. 
D) legally restricted or goodwill-type.

Question 9

Lopez Corp.incurred $420,000 of research and development costs to develop a product for which a patent was granted on January 2, 2002.Legal fees and other costs associated with registration of the patent totaled $80,000.On March 31, 2007, Lopez paid $120,000 for legal fees in a successful defense of the patent.The total amount capitalized for the patent through March 31, 2007 should be

Accepted Answer

A) $200,000. 
B) $500,000. 
C) $540,000. 
D) $620,000. 
A) $200,000. 
B) $500,000. 
C) $540,000. 
D) $620,000.

Question 10

MaBelle Corporation incurred the following costs in 2008: $\begin{array} { l  }
 \text {Acquisition of R\&D equipment with a useful life of  }&\
 \text { 4 years in $ R \& D $ projects}&\$600,000\
 \text {Start-up costs incurred when opening a new plant  }&140,000\
 \text { Advertising expense to introduce a new product}&700,000\
 \text {  Engineering costs incurred to advance a product to full}&\
 \text {production stage }&350,000\
\end{array}$
 What amount should MaBelle record as research & development expense in 2008?

Accepted Answer

A) $500,000 
B) $640,000 
C) $950,000 
D) $1,340,000 
A) $500,000 
B) $640,000 
C) $950,000 
D) $1,340,000

Question 11

The cost of an intangible asset includes all of the following except

Accepted Answer

A) purchase price. 
B) legal fees. 
C) other incidental expenses. 
D) all of these are included. 
A) purchase price. 
B) legal fees. 
C) other incidental expenses. 
D) all of these are included.

Question 12

If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

Accepted Answer

A) True 
 B)False

Question 13

Periodic alterations to existing products are an example of research and development costs.

Accepted Answer

A) True 
 B)False

Question 14

LRF Corporation purchased a patent for $450,000 on September 1, 2006.It had a useful life of 10 years.On January 1, 2008, LRF spent $110,000 to successfully defend the patent in a lawsuit.LRF feels that as of that date, the remaining useful life is 5 years.What amount should be reported for patent amortization expense for 2008?

Accepted Answer

A) $103,000. 
B) $100,000. 
C) $94,000. 
D) $78,000. 
A) $103,000. 
B) $100,000. 
C) $94,000. 
D) $78,000.

Question 15

Internally generated intangible assets are initially recorded at fair value.

Accepted Answer

A) True 
 B)False

Question 16

Maris Corporation acquired a patent on May 1, 2008.Maris paid cash of $25,000 to the seller.Legal fees of $1,000 were paid related to the acquisition.What amount should be debited to the patent account?

Accepted Answer

A) $1,000 
B) $24,000 
C) $25,000 
D) $26,000 
A) $1,000 
B) $24,000 
C) $25,000 
D) $26,000

Question 17

On June 30, 2007, Cey, Inc.exchanged 2,000 shares of Seely Corp.$30 par value common stock for a patent owned by Gore Co.The Seely stock was acquired in 2007 at a cost of $55,000.At the exchange date, Seely common stock had a fair value of $45 per share, and the patent had a net carrying value of $110,000 on Gore's books.Cey should record the patent at

Accepted Answer

A) $55,000. 
B) $60,000. 
C) $90,000. 
D) $110,000. 
A) $55,000. 
B) $60,000. 
C) $90,000. 
D) $110,000.

Question 18

Which of the following costs should be excluded from research and development expense?

Accepted Answer

A) Modification of the design of a product 
B) Acquisition of R & D equipment for use on a current project only 
C) Cost of marketing research for a new product 
D) Engineering activity required to advance the design of a product to the manufacturing stage 
A) Modification of the design of a product 
B) Acquisition of R & D equipment for use on a current project only 
C) Cost of marketing research for a new product 
D) Engineering activity required to advance the design of a product to the manufacturing stage

Question 19

Easton Company and Lofton Company were combined in a purchase transaction.Easton was able to acquire Lofton at a bargain price.The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton.After revaluing noncurrent assets to zero, there was still some "negative goodwill." Proper accounting treatment by Easton is to report the amount as

Accepted Answer

A) an extraordinary gain. 
B) part of current income in the year of combination. 
C) a deferred credit and amortize it. 
D) paid-in capital. 
A) an extraordinary gain. 
B) part of current income in the year of combination. 
C) a deferred credit and amortize it. 
D) paid-in capital.

Question 20

Rich Corporation purchased a limited-life intangible asset for $180,000 on May 1, 2006.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2008?

Accepted Answer

A) $ -0-. 
B) $36,000 
C) $48,000 
D) $54,000 
A) $ -0-. 
B) $36,000 
C) $48,000 
D) $54,000

The cost of purchased patents should be amortized over the remaining legal life of the patent.

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

The intangible asset goodwill may be

Factors considered in determining an intangible asset's useful life include all of the following except

Under current accounting practice, intangible assets are classified as

The cost of an intangible asset includes all of the following except

If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

Periodic alterations to existing products are an example of research and development costs.

Internally generated intangible assets are initially recorded at fair value.

Maris Corporation acquired a patent on May 1, 2008.Maris paid cash of $25,000 to the seller.Legal fees of $1,000 were paid related to the acquisition.What amount should be debited to the patent account?

Which of the following costs should be excluded from research and development expense?

Rich Corporation purchased a limited-life intangible asset for $180,000 on May 1, 2006.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2008?

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Current Liabilities and Contingencies

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Exam 12: Intangible Assets

The cost of purchased patents should be amortized over the remaining legal life of the patent.

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

The intangible asset goodwill may be

Factors considered in determining an intangible asset's useful life include all of the following except

Under current accounting practice, intangible assets are classified as

The cost of an intangible asset includes all of the following except

If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

Periodic alterations to existing products are an example of research and development costs.

Internally generated intangible assets are initially recorded at fair value.

Maris Corporation acquired a patent on May 1, 2008.Maris paid cash of $25,000 to the seller.Legal fees of $1,000 were paid related to the acquisition.What amount should be debited to the patent account?

Which of the following costs should be excluded from research and development expense?

Rich Corporation purchased a limited-life intangible asset for $180,000 on May 1, 2006.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2008?

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Current Liabilities and Contingencies

Filters