Question 1

Research and development costs are recorded as intangible assets if it is felt they will provide economic benefits in future years.

Accepted Answer

A) True 
 B)False

Question 2

Recently, a group of university students decided to incorporate for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting the business, state incorporation fees, and stamp taxes. One student wishes to charge these costs against revenue in the current period. Another wishes to defer these costs and amortize them in the future. Which student is correct and why?

Accepted Answer

These costs are referred to as start-up

Question 3

IFRS allows reversal of impairment losses when there has been a change in economic conditions or in the expected use of the asset. Under U.S GAAP, impairment losses cannot be reversed for assets to be held and used.

Accepted Answer

A) True 
 B)False

Question 4

Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.'s $5 par value common stock and $95,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.'s stock was selling at $7.50 per share. When Mini Corp. acquired the patent, its stock was selling for $9 a share. Mini Corp. should record the patent at what amount?

Accepted Answer

A)  $107,500 
B)  $113,750 
C)  $117,500 
D)  $95,000 
A)  $107,500 
B)  $113,750 
C)  $117,500 
D)  $95,000

Question 5

A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2013 for $2,400,000. The company uses straight-line amortization for patents. On January 2, 2015, 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 2015 is

Accepted Answer

A)  $400,000. 
B)  $ 80,000. 
C)  $109,090. 
D)  $ 92,000. 
A)  $400,000. 
B)  $ 80,000. 
C)  $109,090. 
D)  $ 92,000.

Question 6

Ely Co. bought a patent from Baden Corp. on January 1, 2015, for $600,000. An independent consultant retained by Ely estimated that the remaining useful life at January 1, 2015 is 15 years. Its unamortized cost on Baden's accounting records was $300,000; the patent had been amortized for 5 years by Baden. How much should be amortized for the year ended December 31, 2015 by Ely Co.?

Accepted Answer

A)  $0. 
B)  $30,000. 
C)  $40,000. 
D)  $60,000. 
A)  $0. 
B)  $30,000. 
C)  $40,000. 
D)  $60,000.

Question 7

Listed below is a selection of accounts found in the general ledger of Marshall Corporation as of December 31, 2015:

Instructions
List those accounts that should be classified as intangible assets.

Accepted Answer

Goodwill Non-competition agree

Question 8

Intangible assets have two main characteristics: (1) they lack physical existence, and (2) they are not financial instruments.

Instructions:

(a) Explain why intangible assets are classified as assets if they have no physical existence.

(b) Explain why intangible assets are not considered financial instruments.

Accepted Answer

(a) Intangible assets derive their value

Question 9

Internally generated goodwill should not be capitalized in the accounts.

Accepted Answer

A) True 
 B)False

Question 10

Under U.S. GAAP, impairment losses

Accepted Answer

A)  can be reversed but only if the reversal is greater than the amount of the original impairment. 
B)  can be reversed but only if the reversal falls in a subsequent fiscal year of the company's operations. 
C)  cannot be reversed for assets to be held and used. 
D)  none of these answer choices are correct. 
A)  can be reversed but only if the reversal is greater than the amount of the original impairment. 
B)  can be reversed but only if the reversal falls in a subsequent fiscal year of the company's operations. 
C)  cannot be reversed for assets to be held and used. 
D)  none of these answer choices are correct.

Question 11

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Accepted Answer

A) True 
 B)False

Question 12

Buerhle 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)

Accepted Answer

The answer of Buerhle Company needs to determine if its...

Question 13

Research and development costs

Accepted Answer

A)  are intangible assets. 
B)  may result in the development of a patent. 
C)  are easily identified with specific projects. 
D)  All of these answer choices are correct. 
A)  are intangible assets. 
B)  may result in the development of a patent. 
C)  are easily identified with specific projects. 
D)  All of these answer choices are correct.

Question 14

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 15

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 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

Twilight Corporation acquired End-of-the-World Products on January 1, 2014 for $6,400,000, and recorded goodwill of $1,200,000 as a result of that purchase. At December 31, 2015, the End-of-the-World Products Division had a fair value of $5,440,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $4,640,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2015?

Accepted Answer

A)  $ -0- 
B)  $400,000 
C)  $560,000 
D)  $960,000 
A)  $ -0- 
B)  $400,000 
C)  $560,000 
D)  $960,000

Question 19

Which of the following is a contract-related intangible assts?

Accepted Answer

A)  Trademark 
B)  Copyright 
C)  Franchise 
D)  Patent 
A)  Trademark 
B)  Copyright 
C)  Franchise 
D)  Patent

Question 20

Intangible assets are reported on the balance sheet

Accepted Answer

A)  with an accumulated depreciation account. 
B)  in the property, plant, and equipment section. 
C)  separately from other assets. 
D)  None of these answer choices are correct. 
A)  with an accumulated depreciation account. 
B)  in the property, plant, and equipment section. 
C)  separately from other assets. 
D)  None of these answer choices are correct.

Research and development costs are recorded as intangible assets if it is felt they will provide economic benefits in future years.

IFRS allows reversal of impairment losses when there has been a change in economic conditions or in the expected use of the asset. Under U.S GAAP, impairment losses cannot be reversed for assets to be held and used.

Listed below is a selection of accounts found in the general ledger of Marshall Corporation as of December 31, 2015: Instructions List those accounts that should be classified as intangible assets.

Internally generated goodwill should not be capitalized in the accounts.

Under U.S. GAAP, impairment losses

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Buerhle 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)

Research and development costs

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.

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

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

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

Which of the following is a contract-related intangible assts?

Intangible assets are reported on the balance sheet

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters

Exam 12: Intangible Assets

Research and development costs are recorded as intangible assets if it is felt they will provide economic benefits in future years.

IFRS allows reversal of impairment losses when there has been a change in economic conditions or in the expected use of the asset. Under U.S GAAP, impairment losses cannot be reversed for assets to be held and used.

Listed below is a selection of accounts found in the general ledger of Marshall Corporation as of December 31, 2015: Instructions List those accounts that should be classified as intangible assets.

Internally generated goodwill should not be capitalized in the accounts.

Under U.S. GAAP, impairment losses

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Buerhle 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)

Research and development costs

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.

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

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

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

Which of the following is a contract-related intangible assts?

Intangible assets are reported on the balance sheet

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters