Question 1

The total amount of patent cost amortized to date is usually

Accepted Answer

A) shown in a separate Accumulated Patent Amortization account which is shown contra to the Patent account. 
B) shown in the current income statement. 
C) reflected as credits in the Patent account. 
D) reflected as a contra property, plant and equipment item. 
A) shown in a separate Accumulated Patent Amortization account which is shown contra to the Patent account. 
B) shown in the current income statement. 
C) reflected as credits in the Patent account. 
D) reflected as a contra property, plant and equipment item.

Question 2

Riser Corporation was granted a patent on a product on January 1, 1998.To protect its patent, the corporation purchased on January 1, 2007 a patent on a competing product which was originally issued on January 10, 2003.Because of its unique plant, Riser Corporation does not feel the competing patent can be used in producing a product.The cost of the competing patent should be

Accepted Answer

A) amortized over a maximum period of 20 years. 
B) amortized over a maximum period of 16 years. 
C) amortized over a maximum period of 11 years. 
D) expensed in 2007. 
A) amortized over a maximum period of 20 years. 
B) amortized over a maximum period of 16 years. 
C) amortized over a maximum period of 11 years. 
D) expensed in 2007.

Question 3

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

Accepted Answer

A) True 
 B)False

Question 4

Operating losses incurred during the start-up years of a new business should be

Accepted Answer

A) accounted for and reported like the operating losses of any other business. 
B) written off directly against retained earnings. 
C) capitalized as a deferred charge and amortized over five years. 
D) capitalized as an intangible asset and amortized over a period not to exceed 20 years. 
A) accounted for and reported like the operating losses of any other business. 
B) written off directly against retained earnings. 
C) capitalized as a deferred charge and amortized over five years. 
D) capitalized as an intangible asset and amortized over a period not to exceed 20 years.

Question 5

Internally created intangibles are recorded at cost.

Accepted Answer

A) True 
 B)False

Question 6

Wildcat Baseball Company had a player contract with Carter that was recorded in its accounting records at $5,800,000.Aggie Baseball Company had a player contract with Jeter that was recorded in its accounting records at $5,600,000.Wildcat traded Carter to Aggie for Jeter by exchanging each player's contract.The fair value of each contract was $6,000,000.What amount should be shown in the accounting records after the exchange of player contracts? $\begin{array}{lll}
&\text { Wildcat } & \text { Aggie }\
\text { a. } & \$ 5,600,000 & \$ 5,600,000 \
\text { b. } & \$ 5,600,000 & \$ 5,800,000 \
\text { c. } & \$ 5,800,000 & \$ 5,600,000 \
\text { d. } & \$ 6,000,000 & \$ 6,000,000
\end{array}$

Accepted Answer

The answer of Wildcat Baseball Company had a player contract...

Question 7

Kerr Company purchased a patent on January 1, 2006 for $180,000.The patent had a remaining useful life of 10 years at that date.In January of 2007, Kerr successfully defends the patent at a cost of $81,000, extending the patent's life to 12/31/18.What amount of amortization expense would Kerr record in 2007?

Accepted Answer

A) $18,000 
B) $20,250 
C) $21,750 
D) $27,000 
A) $18,000 
B) $20,250 
C) $21,750 
D) $27,000

Question 8

On May 5, 2007, Flynn Corp.exchanged 2,000 shares of its $25 par value treasury common stock for a patent owned by Denson Co.The treasury shares were acquired in 2006 for $45,000.At May 5, 2007, Flynn's common stock was quoted at $32 per share, and the patent had a carrying value of $55,000 on Denson's books.Flynn should record the patent at

Accepted Answer

A) $45,000. 
B) $50,000. 
C) $55,000. 
D) $64,000. 
A) $45,000. 
B) $50,000. 
C) $55,000. 
D) $64,000.

Question 9

The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

Accepted Answer

A) True 
 B)False

Question 10

A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2005 for $1,200,000.The company uses straight-line amortization for patents.On January 2, 2007, a new patent is received for a timed-release version of the same drug.The new patent has a legal and useful life of twenty years.The least amount of amortization that could be recorded in 2007 is

Accepted Answer

A) $200,000. 
B) $40,000. 
C) $54,545. 
D) $60,000. 
A) $200,000. 
B) $40,000. 
C) $54,545. 
D) $60,000.

Question 11

Purchased goodwill should

Accepted Answer

A) be written off as soon as possible against retained earnings. 
B) be written off as soon as possible as an extraordinary item. 
C) be written off by systematic charges as a regular operating expense over the period benefited. 
D) not be amortized. 
A) be written off as soon as possible against retained earnings. 
B) be written off as soon as possible as an extraordinary item. 
C) be written off by systematic charges as a regular operating expense over the period benefited. 
D) not be amortized.

Question 12

On January 2, 2007, Klein Co.bought a trademark from Royce, Inc.for $500,000.An independent research company estimated that the remaining useful life of the trademark was 10 years.Its unamortized cost on Royce's books was $400,000.In Klein's 2007 income statement, what amount should be reported as amortization expense?

Accepted Answer

A) $50,000. 
B) $40,000. 
C) $25,000. 
D) $20,000. 
A) $50,000. 
B) $40,000. 
C) $25,000. 
D) $20,000.

Question 13

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

Accepted Answer

A) True 
 B)False

Question 14

Hall Co.incurred research and development costs in 2007 as follows: $\begin{array} { l  }
 \text {Materials used in research and development projects }&\$450,000\
 \text { Equipment acquired that will have alternate future uses in future research}&\
 \text {  and development projects}&3,000,000\
 \text { Depreciation for 2007 on above equipment}&300,000\
 \text { Personnel costs of persons involved in research and development projects}&750,000\
 \text { Consulting fees paid to outsiders for research and development projects }&150,000\
 \text {  Indirect costs reasonably allocable to research and development projects}&225,000\&\$4,875,000
\end{array}$
 The amount of research and development costs charged to Hall's 2007 income statement should be

Accepted Answer

A) $1,500,000. 
B) $1,650,000. 
C) $1,875,000. 
D) $4,050,000. 
A) $1,500,000. 
B) $1,650,000. 
C) $1,875,000. 
D) $4,050,000.

Question 15

How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?

Accepted Answer

A) Must be capitalized when incurred and then amortized over their estimated useful lives. 
B) Must be expensed in the period incurred. 
C) May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved. 
D) Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable. 
A) Must be capitalized when incurred and then amortized over their estimated useful lives. 
B) Must be expensed in the period incurred. 
C) May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved. 
D) Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.

Question 16

When a patent is amortized, the credit is usually made to

Accepted Answer

A) the Patent account. 
B) an Accumulated Amortization account. 
C) a Deferred Credit account. 
D) an expense account. 
A) the Patent account. 
B) an Accumulated Amortization account. 
C) a Deferred Credit account. 
D) an expense account.

Question 17

Amortization of limited-life intangible assets should not be impacted by expected residual values.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not an intangible asset?

Accepted Answer

A) Trade name 
B) Research and development costs 
C) Franchise 
D) Copyrights 
A) Trade name 
B) Research and development costs 
C) Franchise 
D) Copyrights

Question 19

Mining Company acquired a patent on an oil extraction technique on January 1, 2006 for $5,000,000.It was expected to have a 10 year life and no residual value.Mining uses straight-line amortization for patents.On December 31, 2007, the expected future cash flows expected from the patent were expected to be $600,000 per year for the next eight years.The present value of these cash flows, discounted at Mining's market interest rate, is $2,800,000.At what amount should the patent be carried on the December 31, 2007 balance sheet?

Accepted Answer

A) $5,000,000 
B) $4,800,000 
C) $4,000,000 
D) $2,800,000 
A) $5,000,000 
B) $4,800,000 
C) $4,000,000 
D) $2,800,000

Question 20

Leeper Corporation incurred the following costs in 2008: $\begin{array}{lr}
 \text {Acquisition of } R \& D \text { equipment with a useful life of  }\
\text { 4 years in R\&D projects } & \$ 800,000 \
\text { Start-up costs incurred when opening a new plant } & 140,000 \
\text { Advertising expense to introduce a new product } & 700,000 \
\text { Engineering costs incurred to advance a product to full } & \
\quad \text { production stage } & 500,000
\end{array}$ What amount should Leeper record as research & development expense in 2008?

Accepted Answer

A) $700,000 
B) $840,000 
C) $1,300,000 
D) $1,540,000 
A) $700,000 
B) $840,000 
C) $1,300,000 
D) $1,540,000

The total amount of patent cost amortized to date is usually

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

Operating losses incurred during the start-up years of a new business should be

Internally created intangibles are recorded at cost.

The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

Purchased goodwill should

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?

When a patent is amortized, the credit is usually made to

Amortization of limited-life intangible assets should not be impacted by expected residual values.

Which of the following is not an intangible asset?

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

Exam 12: Intangible Assets

The total amount of patent cost amortized to date is usually

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

Operating losses incurred during the start-up years of a new business should be

Internally created intangibles are recorded at cost.

The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

Purchased goodwill should

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?

When a patent is amortized, the credit is usually made to

Amortization of limited-life intangible assets should not be impacted by expected residual values.

Which of the following is not an intangible asset?

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