Question 1

Contra accounts must be reported for intangible assets in a manner similar to accumu-lated depreciation and property, plant, and equipment.

Accepted Answer

A) True 
 B)False

Question 2

On January 1, 2003, Unruh Company purchased a copyright for $800,000, having an estimated useful life of 16 years.In January 2007, Unruh paid $120,000 for legal fees in a successful defense of the copyright.Copyright amortization expense for the year ended December 31, 2007, should be

Accepted Answer

A) $0. 
B) $50,000. 
C) $57,500. 
D) $60,000. 
A) $0. 
B) $50,000. 
C) $57,500. 
D) $60,000.

Question 3

January 2, 2004, Koll, Inc.purchased a patent for a new consumer product for $180,000.At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product.On December 31, 2007, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product.What amount should Koll charge against income during 2007, assuming amortization is recorded at the end of each year?

Accepted Answer

A) $18,000 
B) $108,000 
C) $126,000 
D) $144,000 
A) $18,000 
B) $108,000 
C) $126,000 
D) $144,000

Question 4

If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as

Accepted Answer

A) research and development expense in the period(s) of construction. 
B) depreciation deducted as part of research and development costs. 
C) depreciation or immediate write-off depending on company policy. 
D) an expense at such time as productive research and development has been obtained from the facility. 
A) research and development expense in the period(s) of construction. 
B) depreciation deducted as part of research and development costs. 
C) depreciation or immediate write-off depending on company policy. 
D) an expense at such time as productive research and development has been obtained from the facility.

Question 5

Turner Company's 12/31/08 balance sheet reports assets of $6,000,000 and liabilities of $2,500,000.All of Turner's assets' book values approximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value.On 12/31/08, Benedict Corporation paid $6,100,000 to acquire Turner.What amount of goodwill should Benedict record as a result of this purchase?

Accepted Answer

A) $ -0- 
B) $ 100,000 
C) $2,200,000 
D) $2,600,000 
A) $ -0- 
B) $ 100,000 
C) $2,200,000 
D) $2,600,000

Question 6

Martin Inc.incurred the following costs during the year ended December 31, 2007: $\begin{array} { l  }
 \text { Laboratory research aimed at discovery of new knowledge}&\$180,000\
\text {  Costs of testing prototype and design modifications}&45,000\
\text { Quality control during commercial production, including routine testing }&\
\text {  of products}&270,000\
\text {  Construction of research facilities having an estimated useful life of}&\
\text {  6 years but no alternative future use}&360,000\
\end{array}$
 The total amount to be classified and expensed as research and development in 2007 is

Accepted Answer

A) $555,000. 
B) $855,000. 
C) $585,000. 
D) $285,000. 
A) $555,000. 
B) $855,000. 
C) $585,000. 
D) $285,000.

Question 7

Wriglee, Inc.went to court this year and successfully defended its patent from infringe-ment by a competitor.The cost of this defense should be charged to

Accepted Answer

A) patents and amortized over the legal life of the patent. 
B) legal fees and amortized over 5 years or less. 
C) expenses of the period. 
D) patents and amortized over the remaining useful life of the patent. 
A) patents and amortized over the legal life of the patent. 
B) legal fees and amortized over 5 years or less. 
C) expenses of the period. 
D) patents and amortized over the remaining useful life of the patent.

Question 8

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters.These costs are said to benefit the corporation for the entity's entire life.These costs should be

Accepted Answer

A) capitalized and never amortized. 
B) capitalized and amortized over 40 years. 
C) capitalized and amortized over 5 years. 
D) expensed as incurred. 
A) capitalized and never amortized. 
B) capitalized and amortized over 40 years. 
C) capitalized and amortized over 5 years. 
D) expensed as incurred.

Question 9

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

Accepted Answer

A) True 
 B)False

Question 10

If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

Accepted Answer

A) True 
 B)False

Question 11

Internally generated goodwill should not be capitalized in the accounts.

Accepted Answer

A) True 
 B)False

Question 12

In January, 2002, Findley Corporation purchased a patent for a new consumer product for $720,000.At the time of purchase, the patent was valid for fifteen years.Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years.During 2007 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product.What amount should Findley charge to expense during 2007, assuming amortization is recorded at the end of each year?

Accepted Answer

A) $480,000. 
B) $360,000. 
C) $72,000. 
D) $48,000. 
A) $480,000. 
B) $360,000. 
C) $72,000. 
D) $48,000.

Question 13

A loss on impairment of an intangible asset is the difference between the asset's

Accepted Answer

A) carrying amount and the expected future net cash flows. 
B) carrying amount and its fair value. 
C) fair value and the expected future net cash flows. 
D) book value and its fair value. 
A) carrying amount and the expected future net cash flows. 
B) carrying amount and its fair value. 
C) fair value and the expected future net cash flows. 
D) book value and its fair value.

Question 14

Weaver Boxing Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet.The impairment test(s) to be used is (are) $$\begin{array}{l}\begin{array} { l l l } 
&\underline { \text { Recoverability Test } } & \underline { \text { Fair Value Test } }\

\text { a. } & \text { Yes } & \text { Yes } \
\text { b. } & \text { Yes } & \text { No } \
\text { c } & \text { No } & \text { Yes } \
\text { d. } & \text { No } & \text { No }
\end{array}
\end{array}$$

Accepted Answer

The answer of Weaver Boxing Company needs to determine if...

Question 15

Fleming Corporation acquired Out-of-Sight Products on January 1, 2008 for $4,000,000, and recorded goodwill of $750,000 as a result of that purchase.At December 31, 2008, the Out-of-Sight Products Division had a fair value of $3,400,000.The net identifiable assets of the Division (excluding goodwill) had a fair value of $2,900,000 at that time.What amount of loss on impairment of goodwill should Fleming record in 2008?

Accepted Answer

A) $ -0- 
B) $250,000 
C) $350,000 
D) $600,000 
A) $ -0- 
B) $250,000 
C) $350,000 
D) $600,000

Question 16

Distributor Company purchases Supplier Company for $800,000 cash on January 1, 2007.The book value of Supplier Company's net assets, as reflected on its December 31, 2006 balance sheet is $620,000.An analysis by Distributor on December 31, 2006 indicates that the fair value of Supplier's tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets exceeded book value by $45,000.How much goodwill should be recognized by Distributor Company when recording the purchase of Supplier Company?

Accepted Answer

A) $ -0- 
B) $180,000 
C) $120,000 
D) $75,000 
A) $ -0- 
B) $180,000 
C) $120,000 
D) $75,000

Question 17

The reason goodwill is sometimes referred to as a master valuation account is because

Accepted Answer

A) it represents the purchase price of a business that is about to be sold. 
B) it is the difference between the fair market value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business. 
C) the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation. 
D) it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value. 
A) it represents the purchase price of a business that is about to be sold. 
B) it is the difference between the fair market value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business. 
C) the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation. 
D) it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

Question 18

Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

Accepted Answer

A) True 
 B)False

Question 19

The cost of acquiring a customer list from another company is recorded as an intangible asset.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following research and development related costs should be capitalized and amortized over current and future periods?

Accepted Answer

A) Research and development general laboratory building which can be put to alternative uses in the future 
B) Inventory used for a specific research project 
C) Administrative salaries allocated to research and development 
D) Research findings purchased from another company to aid a particular research project currently in process 
A) Research and development general laboratory building which can be put to alternative uses in the future 
B) Inventory used for a specific research project 
C) Administrative salaries allocated to research and development 
D) Research findings purchased from another company to aid a particular research project currently in process

Contra accounts must be reported for intangible assets in a manner similar to accumu-lated depreciation and property, plant, and equipment.

On January 1, 2003, Unruh Company purchased a copyright for $800,000, having an estimated useful life of 16 years.In January 2007, Unruh paid $120,000 for legal fees in a successful defense of the copyright.Copyright amortization expense for the year ended December 31, 2007, should be

If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as

Wriglee, Inc.went to court this year and successfully defended its patent from infringe-ment by a competitor.The cost of this defense should be charged to

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters.These costs are said to benefit the corporation for the entity's entire life.These costs should be

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

Internally generated goodwill should not be capitalized in the accounts.

A loss on impairment of an intangible asset is the difference between the asset's

Weaver Boxing Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet.The impairment test(s) to be used is (are) a. Yes Yes b. Yes No c No Yes d. No No

The reason goodwill is sometimes referred to as a master valuation account is because

Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

The cost of acquiring a customer list from another company is recorded as an intangible asset.

Which of the following research and development related costs should be capitalized and amortized over current and future periods?

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

Contra accounts must be reported for intangible assets in a manner similar to accumu-lated depreciation and property, plant, and equipment.

On January 1, 2003, Unruh Company purchased a copyright for $800,000, having an estimated useful life of 16 years.In January 2007, Unruh paid $120,000 for legal fees in a successful defense of the copyright.Copyright amortization expense for the year ended December 31, 2007, should be

If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as

Wriglee, Inc.went to court this year and successfully defended its patent from infringe-ment by a competitor.The cost of this defense should be charged to

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters.These costs are said to benefit the corporation for the entity's entire life.These costs should be

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

Internally generated goodwill should not be capitalized in the accounts.

A loss on impairment of an intangible asset is the difference between the asset's

Weaver Boxing Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet.The impairment test(s) to be used is (are) a. Yes Yes b. Yes No c No Yes d. No No

The reason goodwill is sometimes referred to as a master valuation account is because

Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

The cost of acquiring a customer list from another company is recorded as an intangible asset.

Which of the following research and development related costs should be capitalized and amortized over current and future periods?

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