Question 1

A trademark may properly be considered to have an indefinite life.

Accepted Answer

A) True 
 B)False

Question 2

Acceptable accounting practice requires that disclosure be made in the financial statements of the total R & D costs charged to expense each period for which an income statement is presented.

Accepted Answer

A) True 
 B)False

Question 3

Calvin Company incurred the following costs related to the start-up of the business:
 
The company wishes to amortize these costs over the maximum period allowed under generally accepted accounting principles. Assuming that Calvin Company began operation on January 1, 2008, what amount of the start-up costs should be amortized in 2009?

Accepted Answer

A)  $4,400 
B)  $2,200 
C)  $800 
D)  $0 
A)  $4,400 
B)  $2,200 
C)  $800 
D)  $0

Question 4

Isa Company has equipment that, due to changes in use, is reviewed for possible impairment. The asset's carrying amount is $400,000 ($500,000 cost less $100,000 accumulated depreciation). The expected future net cash flows (undiscounted) from the use of the asset and its eventual disposition are determined to be $380,000 and it has a current market value of $350,000. What is the amount of the impairment, if any, that should be recorded by Isa Company?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $50,000 
D)  $400,000 
A)  $0 
B)  $20,000 
C)  $50,000 
D)  $400,000

Question 5

Use of the master valuation approach to measure goodwill requires an estimate of a firm's excess earning power.

Accepted Answer

A) True 
 B)False

Question 6

On June 30, 2008, 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 2008 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 7

Which of the following legal fees should be capitalized? 
$\begin{array}{cc}
\text {Legal fees to} &\text {Legal fees to successfully} \
\text {obtain a copyright}&\text {defend a trademark}\\end{array}$

Accepted Answer

A) $\begin{array}{cc}&&\text { No} &&&&&&&&\text { No} \\end{array}$ 
B)  $\begin{array}{cc}&& \text {No} &&&&&&&& \text {Yes} \\end{array}$ 
C)  $\begin{array}{cc}&&\text { Yes} &&&&&&&\text { Yes} \\end{array}$ 
D)  $\begin{array}{cc}&&\text { Yes} &&&&&&&\text { No} \\end{array}$ 
A) $\begin{array}{cc}&&\text { No} &&&&&&&&\text { No} \\end{array}$ 
B)  $\begin{array}{cc}&& \text {No} &&&&&&&& \text {Yes} \\end{array}$ 
C)  $\begin{array}{cc}&&\text { Yes} &&&&&&&\text { Yes} \\end{array}$ 
D)  $\begin{array}{cc}&&\text { Yes} &&&&&&&\text { No} \\end{array}$

Question 8

MaBelle Corporation incurred the following costs in 2008:   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 9

Mining Company acquired a patent on an oil extraction technique on January 1, 2007 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, 2008, 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, 2008 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 10

The amortization of goodwill

Accepted Answer

A)  is dependent upon the number of years a company expects to use the benefits it provides. 
B)  does not happen as it is deemed to have an indefinite life. 
C)  represents as acceptable an accounting practice as does the immediate write-off method. 
D)  should be computed using the straight-line method unless another method is deemed more appropriate. 
A)  is dependent upon the number of years a company expects to use the benefits it provides. 
B)  does not happen as it is deemed to have an indefinite life. 
C)  represents as acceptable an accounting practice as does the immediate write-off method. 
D)  should be computed using the straight-line method unless another method is deemed more appropriate.

Question 11

The following information is available for Barkley Company's patents:   Barkley would record a loss on impairment of

Accepted Answer

A)  $1,080,000. 
B)  $220,000. 
C)  $160,000. 
D)  $60,000. 
A)  $1,080,000. 
B)  $220,000. 
C)  $160,000. 
D)  $60,000.

Question 12

Distributor Company purchases Supplier Company for $800,000 cash on January 1, 2009. The book value of Supplier Company's net assets, as reflected on its December 31, 2008 balance sheet is $620,000. An analysis by Distributor on December 31, 2008 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 13

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? 
$\begin{array}{cc}
&&\text {Wildcat} &&\text { Aggie} \\end{array}$

Accepted Answer

A) $\begin{array}{cc} \$ 5,600,000  &\$ 5,600,000 \\end{array}$ 
B) $\begin{array}{cc} \$ 5,600,000 &\$ 5,800,000 \\end{array}$ 
C) $\begin{array}{cc} \$ 5,800,000  & \$5,600,000 \\end{array}$ 
D) $\begin{array}{cc}\$ 6,000,000&  \$ 6,000,000  \\end{array}$ 
A) $\begin{array}{cc} \$ 5,600,000  &\$ 5,600,000 \\end{array}$ 
B) $\begin{array}{cc} \$ 5,600,000 &\$ 5,800,000 \\end{array}$ 
C) $\begin{array}{cc} \$ 5,800,000  & \$5,600,000 \\end{array}$ 
D) $\begin{array}{cc}\$ 6,000,000&  \$ 6,000,000  \\end{array}$

Question 14

The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be

Accepted Answer

A)  charged off in the current period. 
B)  amortized over the legal life of the purchased patent. 
C)  added to factory overhead and allocated to production of the purchaser's product. 
D)  amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product. 
A)  charged off in the current period. 
B)  amortized over the legal life of the purchased patent. 
C)  added to factory overhead and allocated to production of the purchaser's product. 
D)  amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product.

Question 15

Martin Inc. incurred the following costs during the year ended December 31, 2008:   The total amount to be classified and expensed as research and development in 2008 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 16

Hooker Corporation acquired a franchise to operate a Good Pet Dog Kennel in January, 2003. The cost of the franchise was $125,000 and was estimated to have a limited life of 40 years. Early in the year 2009, the franchise was deemed worthless due to significant law suits that caused the franchisor to go out of business. What amount of cost or expense should be charged to the income statement of Hooker Corporation for the years noted below? 
$\begin{array}{cc}
 &&& 2003 & 2009 \\end{array}$

Accepted Answer

A)  $\begin{array}{cc}&  \$ 5,000 &  \$ 5,000 \\end{array}$ 
B) $\begin{array}{cc}& \$ 3,125  & \$ 3,125  \\end{array}$ 
C) $\begin{array}{cc} & \$ 0  &&&  \$ 125,000  \\end{array}$ 
D)  $\begin{array}{cc}& \$ 3,125 & \$ 106,250  \
\end{array}$ 
A)  $\begin{array}{cc}&  \$ 5,000 &  \$ 5,000 \\end{array}$ 
B) $\begin{array}{cc}& \$ 3,125  & \$ 3,125  \\end{array}$ 
C) $\begin{array}{cc} & \$ 0  &&&  \$ 125,000  \\end{array}$ 
D)  $\begin{array}{cc}& \$ 3,125 & \$ 106,250  \
\end{array}$

Question 17

Goodwill is often identified on the balance sheet as the excess of the fair value over the cost of the net assets acquired.

Accepted Answer

A) True 
 B)False

Question 18

The costs of services performed by others in connection with the reporting company's R & D should be expensed as incurred.

Accepted Answer

A) True 
 B)False

Question 19

When the fair market value of the assets acquired in a business purchase exceed the purchase price, negative goodwill (also called badwill) arises. When negative goodwill arises, GAAP requires that it be allocated to

Accepted Answer

A)  an extraordinary gain. 
B)  all periods benefited on an equitable basis. 
C)  reduce proportionately the values assigned to noncurrent assets. 
D)  reduce proportionately the values assigned to both current and noncurrent assets. 
A)  an extraordinary gain. 
B)  all periods benefited on an equitable basis. 
C)  reduce proportionately the values assigned to noncurrent assets. 
D)  reduce proportionately the values assigned to both current and noncurrent assets.

Question 20

Lack of physical substance is the only characteristic of intangible assets that distinguishes them from all other assets reported on the balance sheet.

Accepted Answer

A) True 
 B)False

A trademark may properly be considered to have an indefinite life.

Acceptable accounting practice requires that disclosure be made in the financial statements of the total R & D costs charged to expense each period for which an income statement is presented.

Use of the master valuation approach to measure goodwill requires an estimate of a firm's excess earning power.

Which of the following legal fees should be capitalized? Legal fees to Legal fees to successfully obtain a copyright defend a trademark

MaBelle Corporation incurred the following costs in 2008: What amount should MaBelle record as research & development expense in 2008?

The amortization of goodwill

The following information is available for Barkley Company's patents: Barkley would record a loss on impairment of

The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be

Martin Inc. incurred the following costs during the year ended December 31, 2008: The total amount to be classified and expensed as research and development in 2008 is

Goodwill is often identified on the balance sheet as the excess of the fair value over the cost of the net assets acquired.

The costs of services performed by others in connection with the reporting company's R & D should be expensed as incurred.

When the fair market value of the assets acquired in a business purchase exceed the purchase price, negative goodwill (also called badwill) arises. When negative goodwill arises, GAAP requires that it be allocated to

Lack of physical substance is the only characteristic of intangible assets that distinguishes them from all other assets reported on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Balance Sheet

Income Statement and Related Information

Statement of Cash Flows

Revenue Recognition

Cash and Receivables

Accounting for Inventories

Accounting for Property, Plant, and Equipment

Accounting for Liabilities

Stockholders Equity

Investments

Accounting for Income Taxes

Accounting for Compensation

Accounting for Leases

Additional Reporting Issues

Appendix A: Accounting and the Time Value of Money

Appendix B: Reporting Cash Flows

Appendix D: Retail Inventory Method

Appendix E: Accounting for Natural Resources

Appendix G: Accounting for Troubled Debt

Appendix H: Accounting for Derivative Instruments

Appendix I: Error Analysis

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Exam 11: Intangible Assets

A trademark may properly be considered to have an indefinite life.

Acceptable accounting practice requires that disclosure be made in the financial statements of the total R & D costs charged to expense each period for which an income statement is presented.

Use of the master valuation approach to measure goodwill requires an estimate of a firm's excess earning power.

Which of the following legal fees should be capitalized? Legal fees to Legal fees to successfully obtain a copyright defend a trademark

MaBelle Corporation incurred the following costs in 2008: What amount should MaBelle record as research & development expense in 2008?

The amortization of goodwill

The following information is available for Barkley Company's patents: Barkley would record a loss on impairment of

The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be

Martin Inc. incurred the following costs during the year ended December 31, 2008: The total amount to be classified and expensed as research and development in 2008 is

Goodwill is often identified on the balance sheet as the excess of the fair value over the cost of the net assets acquired.

The costs of services performed by others in connection with the reporting company's R & D should be expensed as incurred.

When the fair market value of the assets acquired in a business purchase exceed the purchase price, negative goodwill (also called badwill) arises. When negative goodwill arises, GAAP requires that it be allocated to

Lack of physical substance is the only characteristic of intangible assets that distinguishes them from all other assets reported on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Balance Sheet

Income Statement and Related Information

Statement of Cash Flows

Revenue Recognition

Cash and Receivables

Accounting for Inventories

Accounting for Property, Plant, and Equipment

Accounting for Liabilities

Stockholders Equity

Investments

Accounting for Income Taxes

Accounting for Compensation

Accounting for Leases

Additional Reporting Issues

Appendix A: Accounting and the Time Value of Money

Appendix B: Reporting Cash Flows

Appendix D: Retail Inventory Method

Appendix E: Accounting for Natural Resources

Appendix G: Accounting for Troubled Debt

Appendix H: Accounting for Derivative Instruments

Appendix I: Error Analysis

Filters