Question 1

Purchased goodwill should be

Accepted Answer

A)  expensed as soon as possible against retained earnings. 
B)  expensed as soon as possible to other comprehensive income. 
C)  amortized over the period benefited, but not more than 40 years. 
D)  not expensed or amortized, but rather reduced only if impairment occurs. 
A)  expensed as soon as possible against retained earnings. 
B)  expensed as soon as possible to other comprehensive income. 
C)  amortized over the period benefited, but not more than 40 years. 
D)  not expensed or amortized, but rather reduced only if impairment occurs.

Question 2

Accounting for unidentifiable intangible assets
Explain how an entity that acquires control over one or more businesses accounts for intangible assets when they are not identifiable.

Accepted Answer

When one entity acquires control over on

Question 3

Goodwill measurement and recording
Snoopy Inc. is considering purchasing the net assets of Woodstock Corporation. Following is the statement of financial position of Woodstock as at December 31, 2020.
 $\begin{array}{c}
\text {WOODSTOCK CORPORATION}\
\text {Statement of Financial Position}\
\text {As at December 31, 2020}\
\begin{array}{|l|r|}
\hline\text { Current assets } & \$ 231,400 \
\hline \text { Buildings and equipment } & 753,000 \
\hline \text { Accumulated amortization } & (113,000) \
\hline \text { Land } & 173,000 \
\hline \text { Total assets } & \$ 1,044,400 \
\hline \text { Current liabilities } & \$ 187,000 \
\hline \text { Commonshares } & 577,000 \
\hline \text { Retained earnings } & 280,400 \
\hline \text { Total liabilities and equity } & \$ 1,044,400\
\hline
\end{array}
\end{array}$ Following are the fair values of Woodstock's net assets as at December 31, 2020.
 $$\begin{array} { | l | r | } 
\hline \text { Current assets } & \mathbf { \$ 2 2 5 , 5 0 0 } \
\hline \text { Buildings and equipment } & \mathbf { 4 8 2 , 6 0 0 } \
\hline \text { Land } & \mathbf { 3 1 3 , 5 0 0 } \
\hline \text { Current liabilities } & { ( 166,300 ) } \
\hline &\$ \mathbf { 8 8 5 , 3 0 0 } \
\hline
\end{array}$$ Instructions
Calculate the value of goodwill that would be recorded by Snoopy if it offered $ 2,060,300 for the net assets of Woodstock Corporation.

Accepted Answer

The answer of Goodwill measurement and recording
Snoopy Inc. is considering...

Question 4

Icicle Corp.'s average annual net income is $ 50,000 above the average for Icicle's industry. Snowy is interested in purchasing Icicle. Assuming Snowy estimates goodwill by capitalizing excess earnings at 13%, the estimated goodwill (to the nearest dollar) is

Accepted Answer

A)  $ 753,846. 
B)  $ 685,162. 
C)  $ 384,615. 
D)  $ 0. 
A)  $ 753,846. 
B)  $ 685,162. 
C)  $ 384,615. 
D)  $ 0.

Question 5

Kingship Inc. is developing a new process that it plans to sell. During 2019 and 2020, the company capitalized $ 1.1 million and $ 0.2 million respectively. An additional $ 0.3 million was spent in 2021. During 2021, it became apparent that, due to a lack of financial resources, the company would not be able to complete the project. The total amount of capitalized costs relating to this project at the end of 2021 is

Accepted Answer

A)  nil. 
B)  $ 1.3 million. 
C)  $ 1.0 million. 
D)  $ 1.6 million. 
A)  nil. 
B)  $ 1.3 million. 
C)  $ 1.0 million. 
D)  $ 1.6 million.

Question 6

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 that 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 that 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 7

Goodwill may be

Accepted Answer

A)  capitalized only when purchased. 
B)  capitalized either when purchased or created internally. 
C)  capitalized only when created internally. 
D)  written off directly to retained earnings. 
A)  capitalized only when purchased. 
B)  capitalized either when purchased or created internally. 
C)  capitalized only when created internally. 
D)  written off directly to retained earnings.

Question 8

Which of the following costs of goodwill should be capitalized? 
$\begin{array}{llcc}
  \text { Costs of goodwill } &  \
 \text { from a business } &\
 \text {  combination accounted } & \text { Costs of developing }\
 \text { for as a purchase } & \text {goodwill internally  }\
\end{array}$

a)$\quad $$\quad $$\begin{array}{llcc}
 \text { No } &\quad \quad \quad \quad \quad \quad \quad \quad \quad \text {No  } 
\end{array}$

b)$\quad $$\quad $$\begin{array}{llcc}
\text {  No} &\quad \quad \quad \quad \quad \quad \quad \quad \quad \text { Yes } 
\end{array}$

c)$\quad $$\quad $$\begin{array}{llcc}
\text { Yes } &\quad \quad \quad \quad \quad \quad \quad \quad\text { Yes } 
\end{array}$

d)$\quad $$\quad $$\begin{array}{llcc}
\text { Yes } &\quad \quad \quad \quad \quad \quad \quad \quad \text {No  } 
\end{array}$

Accepted Answer

The answer of Which of the following costs of goodwill...

Question 9

Which of the following is the impairment test for indefinite-life intangibles?

Accepted Answer

A)  recoverability test and then fair value test 
B)  fair value test and then recoverability test 
C)  recoverability test 
D)  fair value test 
A)  recoverability test and then fair value test 
B)  fair value test and then recoverability test 
C)  recoverability test 
D)  fair value test

Question 10

Calculation of goodwill
Saje Corporation's pre-tax accounting income of $ 726,000 for the year 2020 included the following items:
 $\begin{array}{llcc}
  \text {Amortization of identifiable intangibles  } & \$140,000 \
 \text { Depreciation of building } &119,000\
 \text {  Loss from discontinued operations} &46,000\
 \text { Unusual, non-recurring gains } &157,000\
 \text { Profit-sharing payments to employees } &69,300\
\end{array}$
 Lush Industries Ltd. would like to purchase Saje Corporation. In trying to measure Saje's normalized earnings for 2020, Lush determines that the building's fair value is triple the book value and that its remaining economic life is double the life that Saje is using. Lush would continue the profit-sharing payments to employees, with the payments being based on income from continuing operations before amortization and depreciation.
Instructions
Calculate the 2020 normalized earnings amount of Saje Corporation that Lush would use to calculate goodwill.

Accepted Answer

The answer of Calculation of goodwill
Saje Corporation's pre-tax accounting income...

Question 11

Babel Corporation acquired all outstanding shares of Connor Ltd. for $ 2.1 million. Selected information relating to Connor was as follows: $$\begin{array} { l l } 
\text { Fair value of identifiable net assets: } & \$ 2.0 \text { million } \
\text { Book value of identifiable net ascets: } & \$ 1.6 \text { million } \
\text { Cash balance: } & \$ 0.1 \text { million }
\end{array}$$ Mindy will recognize goodwill of

Accepted Answer

A)  $ 0.1 million. 
B)  $ 1.1 million. 
C)  $ 2.1 million. 
D)  $ 1.5 million. 
A)  $ 0.1 million. 
B)  $ 1.1 million. 
C)  $ 2.1 million. 
D)  $ 1.5 million.

Question 12

Intangible asset impairment
Picot Collective purchases a patent on January 1, 2015 for $ 118,800. At the time of purchase, Picot estimated that the patent had a useful life of 12 years. Picot used the straight-line method to amortize the patent, and annual impairment tests showed no impairment of the patent's value. On January 1, 2020, Picot sold the patent for $ 84,600.
Instructions
Prepare the journal entry to record the sale of the patent.

Accepted Answer

@#IMG-DLM&
Calculations:
Cost $ 118,800

Question 13

Regarding trends in intangible asset reporting, which of the following statements is NOT true?

Accepted Answer

A)  Intangible assets, along with goodwill, have been decreasing as a proportion of companies' reported assets. 
B)  The most common types of intangible assets reported are broadcast rights, publishing rights, trademarks, patents, licences, customer lists, non-competition agreements, franchises, and purchased R&D. 
C)  Intangibles are an important contributor to entity performance and financial position. 
D)  Intangible assets, along with goodwill, have been increasing as a proportion of companies' reported assets. 
A)  Intangible assets, along with goodwill, have been decreasing as a proportion of companies' reported assets. 
B)  The most common types of intangible assets reported are broadcast rights, publishing rights, trademarks, patents, licences, customer lists, non-competition agreements, franchises, and purchased R&D. 
C)  Intangibles are an important contributor to entity performance and financial position. 
D)  Intangible assets, along with goodwill, have been increasing as a proportion of companies' reported assets.

Question 14

An "indefinite life" for an intangible asset means that

Accepted Answer

A)  the asset will last forever. 
B)  unlimited amortization may be recorded for the asset. 
C)  amortization is only recorded if future economic benefits can be determined. 
D)  there appears to be no foreseeable limit to how long the asset will generate positive future cash flows. 
A)  the asset will last forever. 
B)  unlimited amortization may be recorded for the asset. 
C)  amortization is only recorded if future economic benefits can be determined. 
D)  there appears to be no foreseeable limit to how long the asset will generate positive future cash flows.

Question 15

Indefinite versus infinite useful life
Is there a difference between assets with an indefinite useful life versus an infinite useful life?

Accepted Answer

An indefinite life does not mean "infini

Question 16

Which of the following legal fees should be capitalized? $\begin{array}{llcc}
  \text { Legel fees to } &  \text { 
Legal fees to successfully } \
\text { obtaina franchise} & \text {  defend a trademark }\
 &\
a) \text {  No } & \text {No   }\
b) \text { No  } & \text {Yes  }\
c)\text {Yes  } & \text Yes{  }\
d)\text {Yes  } & \text { No  }\
\end{array}$

Accepted Answer

The answer of Which of the following legal fees should...

Question 17

Goodwill was purchased when a business was acquired. When it is determined that the goodwill is impaired, the credit is usually made to

Accepted Answer

A)  the Goodwill account. 
B)  an Accumulated Impairment Loss account. 
C)  a Deferred Credit account. 
D)  a Shareholders' Equity account. 
A)  the Goodwill account. 
B)  an Accumulated Impairment Loss account. 
C)  a Deferred Credit account. 
D)  a Shareholders' Equity account.

Question 18

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:
 Current net aszete:$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\$5.1$ millien
Expected return on net assets for industry:$\quad $$\quad $$\quad $$\quad $$10 \%$ Reported net income for the previous six consecutive years:
 $\begin{array}{llll}
\text { YearAmount } &\text { Year }&\text { Amount } & \
2015 & \$ 710,000 & 2018 & \$ 745,000 \
2016 & \$ 680,000 & 2019 & \$ 815,000 \
2017 & \$ 980,000 & 2020 & \$ 835,000
\end{array}$ Net income for 2020 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 19

Goodwill impairment
On September 1, 2020, Piper Corporation acquired Darcy Enterprises for a cash payment of $ 850,000. At the time of purchase, Darcy's statement of financial position showed assets of $ 890,000, liabilities of $ 450,000, and owner's equity of $ 440,000. The fair value of Darcy's assets is estimated to be $ 1,150,000. Assume that Piper is a public company and the goodwill was allocated entirely to one cash-generating unit (CGU). Two years later, the CGU's carrying amount is $ 3,450,000; its value in use is $ 3,380,000; the fair value less costs to sell is $ 2,980,000.
Instructions
Determine if goodwill is impaired, and calculate the goodwill impairment loss.

Accepted Answer

Under IFRS, the recoverable amount of th

Question 20

The three main characteristics of intangible assets are

Accepted Answer

A)  identifiability, non-physical existence, and nonmonetary nature. 
B)  identifiability, physical existence, and separability. 
C)  separability, identifiability, and nonmonetary nature. 
D)  physical existence, nonmonetary nature, and identifiability. 
A)  identifiability, non-physical existence, and nonmonetary nature. 
B)  identifiability, physical existence, and separability. 
C)  separability, identifiability, and nonmonetary nature. 
D)  physical existence, nonmonetary nature, and identifiability.

Purchased goodwill should be

Accounting for unidentifiable intangible assets Explain how an entity that acquires control over one or more businesses accounts for intangible assets when they are not identifiable.

Icicle Corp.'s average annual net income is $ 50,000 above the average for Icicle's industry. Snowy is interested in purchasing Icicle. Assuming Snowy estimates goodwill by capitalizing excess earnings at 13%, the estimated goodwill (to the nearest dollar) is

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

Goodwill may be

Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business combination accounted Costs of developing for as a purchase goodwill internally a) $\quad$ $\quad$ No No b) $\quad$ $\quad$ No Yes c) $\quad$ $\quad$ Yes Yes d) $\quad$ $\quad$ Yes No

Which of the following is the impairment test for indefinite-life intangibles?

Regarding trends in intangible asset reporting, which of the following statements is NOT true?

An "indefinite life" for an intangible asset means that

Indefinite versus infinite useful life Is there a difference between assets with an indefinite useful life versus an infinite useful life?

Which of the following legal fees should be capitalized? Legel fees to Legal fees to successfully obtaina franchise defend a trademark a) No No b) No Yes c) Yes Y es d) Yes No

Goodwill was purchased when a business was acquired. When it is determined that the goodwill is impaired, the credit is usually made to

The three main characteristics of intangible assets are

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

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

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Exam 12: Intangible Assets and Goodwill

Purchased goodwill should be

Accounting for unidentifiable intangible assets Explain how an entity that acquires control over one or more businesses accounts for intangible assets when they are not identifiable.

Icicle Corp.'s average annual net income is $ 50,000 above the average for Icicle's industry. Snowy is interested in purchasing Icicle. Assuming Snowy estimates goodwill by capitalizing excess earnings at 13%, the estimated goodwill (to the nearest dollar) is

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

Goodwill may be

Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business combination accounted Costs of developing for as a purchase goodwill internally a) \quad \quad No No b) \quad \quad No Yes c) \quad \quad Yes Yes d) \quad \quad Yes No

Which of the following is the impairment test for indefinite-life intangibles?

Regarding trends in intangible asset reporting, which of the following statements is NOT true?

An "indefinite life" for an intangible asset means that

Indefinite versus infinite useful life Is there a difference between assets with an indefinite useful life versus an infinite useful life?

Which of the following legal fees should be capitalized? Legel fees to Legal fees to successfully obtaina franchise defend a trademark a) No No b) No Yes c) Yes Y es d) Yes No

Goodwill was purchased when a business was acquired. When it is determined that the goodwill is impaired, the credit is usually made to

The three main characteristics of intangible assets are

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

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

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters

Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business combination accounted Costs of developing for as a purchase goodwill internally a) $\quad$ $\quad$ No No b) $\quad$ $\quad$ No Yes c) $\quad$ $\quad$ Yes Yes d) $\quad$ $\quad$ Yes No