Question 1

Under IFRS, which of the following statements best describes when goodwill should be tested for impairment?

Accepted Answer

A) Goodwill should be tested for impairment when events or changes in circumstance indicate that impairment may have occurred. 
B) Goodwill should be tested annually for impairment regardless of the circumstances. 
C) Goodwill should be tested for impairment annually and whenever events or changes in circumstance indicate that impairment may have occurred. 
D) Goodwill should only be tested for impairment when the company follows a policy to amortize its goodwill. 
A) Goodwill should be tested for impairment when events or changes in circumstance indicate that impairment may have occurred. 
B) Goodwill should be tested annually for impairment regardless of the circumstances. 
C) Goodwill should be tested for impairment annually and whenever events or changes in circumstance indicate that impairment may have occurred. 
D) Goodwill should only be tested for impairment when the company follows a policy to amortize its goodwill.

Question 2

A change in the amortization rate for an intangible asset should be accounted for as a

Accepted Answer

A) change in accounting principle. 
B) change in reporting entity. 
C) correction of an error. 
D) change in accounting estimate. 
A) change in accounting principle. 
B) change in reporting entity. 
C) correction of an error. 
D) change in accounting estimate.

Question 3

On May 5, 2017, Miami Corp.exchanged 5,000 of its common shares for a copyright owned by Lauderdale Ltd.At this date, Miami's common shares were quoted at $28 per share, and the copyright had a carrying value of $130,000 on Lauderdale's books.Miami should record the copyright at

Accepted Answer

A) $110,000. 
B) $120,000. 
C) $130,000. 
D) $140,000. 
A) $110,000. 
B) $120,000. 
C) $130,000. 
D) $140,000.

Question 4

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

Question 5

The cost of a patent should be amortized over its

Accepted Answer

A) legal life. 
B) legal life or useful life, whichever is shorter. 
C) legal life or useful life, whichever is longer. 
D) Patents are indefinite-life intangibles, therefore not amortized. 
A) legal life. 
B) legal life or useful life, whichever is shorter. 
C) legal life or useful life, whichever is longer. 
D) Patents are indefinite-life intangibles, therefore not amortized.

Question 6

On September 2017, Princes Corporation acquired Royal Mile Incorporated for a cash payment of $864,300.At the time of the purchase, Royal Mile's statement of financial position showed assets of $890,600, liabilities of $469,700, and owners' equity of $420,900.The fair value of Royal Mile's assets is estimated to be $1,162,900.Assume that Princes Corporation is a public company and that the goodwill was allocated entirely to one cash-generating unit (GU).Two years later, the CGU's carrying amount is $3,530,300, the value in use is $3,458,200, and the fair value less costs to sell is $3,058,200.
Goodwill is

Accepted Answer

A) not impaired. 
B) impaired by $72,100. 
C) impaired by $472,100. 
D) Not enough information is provided to assess impairment. 
A) not impaired. 
B) impaired by $72,100. 
C) impaired by $472,100. 
D) Not enough information is provided to assess impairment.

Question 7

During 2017, Spokane Ltd.purchased the net assets of Tacoma Corp.for $635,000.On the date of the transaction, Tacoma reported $200,000 in liabilities.As well, the fair value of Tacoma's assets were:   How should the difference between the fair value of the net assets acquired and the cost be accounted for by Spokane?

Accepted Answer

A) The difference should be credited to retained earnings. 
B) The difference should be recognized as a gain in net income. 
C) The noncurrent assets should be reduced appropriately. 
D) The difference should be prorated between the current and the noncurrent assets. 
A) The difference should be credited to retained earnings. 
B) The difference should be recognized as a gain in net income. 
C) The noncurrent assets should be reduced appropriately. 
D) The difference should be prorated between the current and the noncurrent assets.

Question 8

Use the following information for questions.
Casper Corp.is planning to acquire a controlling interest in the outstanding shares of Frosty Inc.for $9.2 million in cash.
-Assuming the fair value of Frosty's net assets is $10.2 million, and Casper acquires a 75% share, goodwill can be calculated as

Accepted Answer

A) $1,550,000. 
B) $1,243,000. 
C) $1,000,000. 
D) $750,000. 
A) $1,550,000. 
B) $1,243,000. 
C) $1,000,000. 
D) $750,000.

Question 9

Use the following information for questions.
Jeremiah Inc.is being targeted for acquisition by Argo Corporation.As an analyst for Argo, you are asked to determine the goodwill that, pending various assumptions, may be inherent in this potential transaction.
The available information relating to Jeremiah includes the following:   Net income for 2014 included a $200,000 gain from the sale of a discontinued operation.
-Assuming that excess earnings are expected to continue for 8 years, and ignoring the time value of money, estimated goodwill is

Accepted Answer

A) $2,273,000. 
B) $2,006,667. 
C) $1,854,333. 
D) $1,531,733. 
A) $2,273,000. 
B) $2,006,667. 
C) $1,854,333. 
D) $1,531,733.

Question 10

The reason that the revaluation model is NOT widely used for measuring intangible assets after initial recognition is that

Accepted Answer

A) it is not allowed under IFRS. 
B) the cost method is easier to use. 
C) it can be applied only to intangible assets with a fair value determined in an active market. 
D) it requires an extensive internal investigation to determine fair value. 
A) it is not allowed under IFRS. 
B) the cost method is easier to use. 
C) it can be applied only to intangible assets with a fair value determined in an active market. 
D) it requires an extensive internal investigation to determine fair value.

Question 11

The owners of Dallas Electronics Store are contemplating selling the business.The cumulative earnings for the past 5 years totalled $900,000, including a gain on discontinued operations of $30,000.The annual earnings based on an average rate of return on investment for this industry would have been $138,000.If excess earnings are to be capitalized at 15%, then implied goodwill should be

Accepted Answer

A) $210,000. 
B) $280,000. 
C) $240,000. 
D) $870,000. 
A) $210,000. 
B) $280,000. 
C) $240,000. 
D) $870,000.

Question 12

Which of the following is an example of a limited-life intangible asset?

Accepted Answer

A) patent 
B) trade name 
C) goodwill 
D) trademark 
A) patent 
B) trade name 
C) goodwill 
D) trademark

Question 13

Under IFRS, which of the following statements best describes the accounting for intangible assets after acquisition?

Accepted Answer

A) They may be accounted for under either the cost model or the revaluation model. 
B) They should be accounted for under the cost model. 
C) They should be accounted for under the revaluation model if an active market exists for the asset. 
D) They should always be accounted for under the revaluation model. 
A) They may be accounted for under either the cost model or the revaluation model. 
B) They should be accounted for under the cost model. 
C) They should be accounted for under the revaluation model if an active market exists for the asset. 
D) They should always be accounted for under the revaluation model.

Question 14

Sandoval Inc.incurred the following costs during the year ended December 31, 2017:   Assuming the 6 specific conditions have been demonstrated, the total amount to be classified as development costs (either deferred or capitalized)in 2017 is

Accepted Answer

A) $145,000. 
B) $240,000. 
C) $327,000. 
D) $600,000. 
A) $145,000. 
B) $240,000. 
C) $327,000. 
D) $600,000.

Question 15

Internally generated goodwill

Accepted Answer

A) is not possible. 
B) may be capitalized or expensed. 
C) is not capitalized. 
D) is capitalized but not amortized. 
A) is not possible. 
B) may be capitalized or expensed. 
C) is not capitalized. 
D) is capitalized but not amortized.

Question 16

Frosty Corp.'s average annual net income is $75,000 above the average for Frosty's industry.Casper is interested in purchased Frosty.Assuming Casper estimates goodwill by capitalizing excess earnings at 14%, the estimated goodwill (to the nearest dollar)is

Accepted Answer

A) $1,050,000. 
B) $954,333. 
C) $535,714. 
D) $ 0. 
A) $1,050,000. 
B) $954,333. 
C) $535,714. 
D) $ 0.

Question 17

On January 2, 2014, Albion Corp.purchased a patent for a new consumer product for $45,000.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 2017, the product was permanently removed from the market because of a potential health hazard.What amount should Albion recognize as an impairment loss for calendar 2017, assuming amortization has been recorded annually using the straight-line method with no residual value?

Accepted Answer

A) $4,500 
B) $27,000 
C) $31,500 
D) $36,000 
A) $4,500 
B) $27,000 
C) $31,500 
D) $36,000

Question 18

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) amortization deducted as part of research and development costs. 
B) research and development expense in the period(s)of construction. 
C) amortization 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) amortization deducted as part of research and development costs. 
B) research and development expense in the period(s)of construction. 
C) amortization 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 19

Negative goodwill arises when

Accepted Answer

A) the book value of identifiable net assets acquired exceeds the purchase price. 
B) the fair value of identifiable net assets acquired exceeds the purchase price. 
C) the fair value of identifiable net assets acquired is less than the purchase price. 
D) the fair value of identifiable net assets acquired exceeds the book value. 
A) the book value of identifiable net assets acquired exceeds the purchase price. 
B) the fair value of identifiable net assets acquired exceeds the purchase price. 
C) the fair value of identifiable net assets acquired is less than the purchase price. 
D) the fair value of identifiable net assets acquired exceeds the book value.

Question 20

This year, Level Ground Ltd.went to court and successfully defended its trade-marked product, "Hot Gum," from infringement by a competitor.Legal costs of this defence should be charged to

Accepted Answer

A) Trademarks and amortized over the legal life of the trademark. 
B) Trademarks and amortized over the same period of time as the "Hot Gum" trademark. 
C) Legal Expense and amortized over five years or less. 
D) Legal Expense of the period. 
A) Trademarks and amortized over the legal life of the trademark. 
B) Trademarks and amortized over the same period of time as the "Hot Gum" trademark. 
C) Legal Expense and amortized over five years or less. 
D) Legal Expense of the period.

Under IFRS, which of the following statements best describes when goodwill should be tested for impairment?

A change in the amortization rate for an intangible asset should be accounted for as a

On May 5, 2017, Miami Corp.exchanged 5,000 of its common shares for a copyright owned by Lauderdale Ltd.At this date, Miami's common shares were quoted at $28 per share, and the copyright had a carrying value of $130,000 on Lauderdale's books.Miami should record the copyright at

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

The cost of a patent should be amortized over its

Use the following information for questions. Casper Corp.is planning to acquire a controlling interest in the outstanding shares of Frosty Inc.for $9.2 million in cash. -Assuming the fair value of Frosty's net assets is $10.2 million, and Casper acquires a 75% share, goodwill can be calculated as

The reason that the revaluation model is NOT widely used for measuring intangible assets after initial recognition is that

Which of the following is an example of a limited-life intangible asset?

Under IFRS, which of the following statements best describes the accounting for intangible assets after acquisition?

Sandoval Inc.incurred the following costs during the year ended December 31, 2017: Assuming the 6 specific conditions have been demonstrated, the total amount to be classified as development costs (either deferred or capitalized)in 2017 is

Internally generated goodwill

Frosty Corp.'s average annual net income is $75,000 above the average for Frosty's industry.Casper is interested in purchased Frosty.Assuming Casper estimates goodwill by capitalizing excess earnings at 14%, the estimated goodwill (to the nearest dollar)is

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

Negative goodwill arises when

This year, Level Ground Ltd.went to court and successfully defended its trade-marked product, "Hot Gum," from infringement by a competitor.Legal costs of this defence should be charged to

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Complex Financial Instruments

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters

Exam 12: Intangible Assets and Goodwill

Under IFRS, which of the following statements best describes when goodwill should be tested for impairment?

A change in the amortization rate for an intangible asset should be accounted for as a

On May 5, 2017, Miami Corp.exchanged 5,000 of its common shares for a copyright owned by Lauderdale Ltd.At this date, Miami's common shares were quoted at $28 per share, and the copyright had a carrying value of $130,000 on Lauderdale's books.Miami should record the copyright at

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

The cost of a patent should be amortized over its

Use the following information for questions. Casper Corp.is planning to acquire a controlling interest in the outstanding shares of Frosty Inc.for $9.2 million in cash. -Assuming the fair value of Frosty's net assets is $10.2 million, and Casper acquires a 75% share, goodwill can be calculated as

The reason that the revaluation model is NOT widely used for measuring intangible assets after initial recognition is that

Which of the following is an example of a limited-life intangible asset?

Under IFRS, which of the following statements best describes the accounting for intangible assets after acquisition?

Sandoval Inc.incurred the following costs during the year ended December 31, 2017: Assuming the 6 specific conditions have been demonstrated, the total amount to be classified as development costs (either deferred or capitalized)in 2017 is

Internally generated goodwill

Frosty Corp.'s average annual net income is $75,000 above the average for Frosty's industry.Casper is interested in purchased Frosty.Assuming Casper estimates goodwill by capitalizing excess earnings at 14%, the estimated goodwill (to the nearest dollar)is

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

Negative goodwill arises when

This year, Level Ground Ltd.went to court and successfully defended its trade-marked product, "Hot Gum," from infringement by a competitor.Legal costs of this defence should be charged to

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

The Accounting Information System and Measurement Issues

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Property, Plant, and Equipment: Accounting Model Basics

Depreciation, Impairment, and Disposition

Non-Financial Andcurrent Liabilities

Long-Term Financial Liabilities

Shareholders Equity

Complex Financial Instruments

Earnings Per Share

Income Taxes

Pensions and Other Employee Future Benefits

Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Other Measurement and Disclosure Issues

Filters