New Ventures Corp., a publicly accountable entity, capitalized the following costs: \[\begin{array} { | l | r | r | } \hline & \text { Jan 1 - April 30, 2021 } & \text { May 1 - Dec. 31, 2021 } \\ \hline \text { Patents } & 10,000 & 12,000 \\ \hline \text { Copyrights } & 15,000 & 32,000 \\ \hline \end{array}\] Which statement is correct?

A) Both of these assets will have an indefinite useful life. B) Both of these assets will have a definite useful life. C) For both assets, the useful life will be equal to the asset's legal life. D) For both assets, the useful life could be shorter than its legal life. A) Both of these assets will have an indefinite useful life. B) Both of these assets will have a definite useful life. C) For both assets, the useful life will be equal to the asset's legal life. D) For both assets, the useful life could be shorter than its legal life. D

GoodResources incurred the following costs: \[\begin{array} { | l | c | c | c | } \hline \text { Mine Site } & \begin{array} { c } \text { Costsincurred in } \\ \text { exploration and } \\ \text { evaluation } \end{array} & \begin{array} { c } \text { Costs incurred in } \\ \text { development } \end{array} & \text { Status at year-end } \\ \hline \text { Alpha } & 300,000 & 100,000 & \begin{array} { c } \text { Producing } @ 5 \% \text { of } \\ \text { reserves } \end{array} \\ \hline \text { Beta } & 200,000 & & \text { Abandoned } \\ \hline \text { Zeta } & 100,000 & 200,000 & \text { In development } \\ \hline \end{array}\] How much would be recorded as depreciation expense under the full cost method?

A) $5,000 B) $15,000 C) $30,000 D) $45,000 A) $5,000 B) $15,000 C) $30,000 D) $45,000

GoodResources incurred the following costs: \[\begin{array} { | l | c | c | c | } \hline \text { Mine Site } & \begin{array} { c } \text { Costsincurred in } \\ \text { exploration and } \\ \text { evaluation } \end{array} & \begin{array} { c } \text { Costs incurred in } \\ \text { development } \end{array} & \text { Status at year-end } \\ \hline \text { Alpha } & 300,000 & 100,000 & \begin{array} { c } \text { Producing } @ 5 \% \text { of } \\ \text { reserves } \end{array} \\ \hline \text { Beta } & 200,000 & & \text { Abandoned } \\ \hline \text { Zeta } & 100,000 & 200,000 & \text { In development } \\ \hline \end{array}\] How much would be recorded as depletion expense under the full cost method?

A) $5,000 B) $15,000 C) $30,000 D) $45,000 A) $5,000 B) $15,000 C) $30,000 D) $45,000

SuperIdeas Corp, a publicly accountable entity, incurred the following costs in its research and development division: \[\begin{array} { | l | r | r | } \hline & \text { Jan 1 - July 31, 2021 } & \text { Aug 1- Dec. 31, 2021 } \\ \hline \text { Materials } & 10,000 & 12,000 \\ \hline \text { Labour costs } & 15,000 & 32,000 \\ \hline \text { Directly attributable overhead } & 8,000 & 15,000 \\ \hline \end{array}\] At August 1, 2021, SuperIdeas determined that the project was technically feasible but not commercially viable. How much, if any, of the costs can be capitalized for fiscal 2021?

A) $0 B) $44,000 C) $59,000 D) $92,000 A) $0 B) $44,000 C) $59,000 D) $92,000

Soorya Resources incurred the following costs: \[\begin{array} { | l | c | c | c | } \hline \text { Mine Site } & \begin{array} { c } \text { Costsincurred in } \\ \text { exploration and } \\ \text { evaluation } \end{array} & \begin{array} { c } \text { Costs incurred in } \\ \text { development } \end{array} & \text { Status at year-end } \\ \hline \text { Alpha } & 300,000 & 100,000 & \begin{array} { c } \text { Producing } @ 5 \% \text { of } \\ \text { reserves } \end{array} \\ \hline \text { Beta } & 200,000 & & \text { Abandoned } \\ \hline \text { Zeta } & 100,000 & 200,000 & \text { In development } \\ \hline \end{array}\] How much would be capitalized as "intangible assets" under the full cost method?

A) $300,000 B) $400,000 C) $500,000 D) $600,000 A) $300,000 B) $400,000 C) $500,000 D) $600,000

Exam 9: Intangible Assets, Goodwill, Mineral Resources, and Government Grants

In 2021, Waverly Corp. set up a new manufacturing facility in Nova Scotia. To encourage Waverly to set up its factory, the province provided equipment with a fair value of $250,000, and estimated residual value of $0, and an estimated useful life of 10 years using straight-line depreciation. What journal entry would be required in fiscal 2022, using the gross method?

Free

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Question 1

Correct Answer:

Verified

C

Explain four differences in the recognition of externally acquired intangibles versus internally developed intangibles.

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Question 2

Correct Answer:

Verified

•Ultimately, whether and how an enterprise satisfies the recognition criteria depends on the way it obtains the intangible asset: whether it acquires it externally or develops the intangible asset internally.
•Acquired intangibles readily satisfy the recognition and measurement criteria: IFRS presumes that (i)intangibles acquired from arm's-length parties meet the criterion of having probable future benefits, and that (ii)such benefits can be measured reliably.
•Internally developed intangibles must meet more stringent criteria. IAS 38 identifies two distinct stages for internally developed intangibles: a research phase and a development phase. The costs incurred in the research phase must be expensed because the activities do not relate to an identifiable product or process. Development activities are further advanced than research in terms of commercially viable products or processes. Therefore, it is possible to satisfy the criterion of probable future benefits. However, not all costs incurred in the development phase qualify for capitalization. IAS 38 provides a further list of six criteria for the capitalization of development costs.
•The difference is due to the lower reliability of measuring the benefits of internally developed intangibles, and the greater possibility of management bias in developing the estimates of those benefits.

New Ventures Corp., a publicly accountable entity, capitalized the following costs: Jan 1 - April 30, 2021 May 1 - Dec. 31, 2021 Patents 10,000 12,000 Copyrights 15,000 32,000 Which statement is correct?

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

D

GoodResources incurred the following costs: Mine Site Costsincurred in exploration and evaluation Costs incurred in development Status at year-end Alpha 300,000 100,000 Producing @5\% of reserves Beta 200,000 Abandoned Zeta 100,000 200,000 In development How much would be recorded as depreciation expense under the full cost method?

(Multiple Choice)

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Question 4

Which statement is not correct?

(Multiple Choice)

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Question 5

GoodResources incurred the following costs: Mine Site Costsincurred in exploration and evaluation Costs incurred in development Status at year-end Alpha 300,000 100,000 Producing @5\% of reserves Beta 200,000 Abandoned Zeta 100,000 200,000 In development How much would be recorded as depletion expense under the full cost method?

(Multiple Choice)

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Question 6

What factor will not affect the estimated useful life of a finite lived intangible asset?

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Question 7

Which criteria under IAS 38 would be met if the "project has a dedicated group of qualified staff"?

(Multiple Choice)

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Question 8

Which statement is correct?

(Multiple Choice)

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Question 9

Explain the accounting for assets in the mineral resource exploration industry.

(Essay)

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Question 10

SuperIdeas Corp, a publicly accountable entity, incurred the following costs in its research and development division: Jan 1 - July 31, 2021 Aug 1- Dec. 31, 2021 Materials 10,000 12,000 Labour costs 15,000 32,000 Directly attributable overhead 8,000 15,000 At August 1, 2021, SuperIdeas determined that the project was technically feasible but not commercially viable. How much, if any, of the costs can be capitalized for fiscal 2021?

(Multiple Choice)

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Question 11

Explain how earnings can be manipulated through choices made in the estimated useful lives for intangible assets.

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Question 12

Explain how government grants are accounted for and presented in the financial statements.

(Essay)

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Question 13

Assume that a company has spent $1 million during the year and is deciding whether these costs should be expensed as research costs or capitalized as development costs. Explain the impact of undercapitalization of development costs on the financial statements.

(Essay)

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Question 14

Which of the following is not a parameter of amortization?

(Multiple Choice)

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Question 15

Soorya Resources incurred the following costs: Mine Site Costsincurred in exploration and evaluation Costs incurred in development Status at year-end Alpha 300,000 100,000 Producing @5\% of reserves Beta 200,000 Abandoned Zeta 100,000 200,000 In development How much would be capitalized as "intangible assets" under the full cost method?

(Multiple Choice)

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Question 16

Which of the following is not a characteristic of intangible assets?

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Question 17

Which of the following is not a characteristic of an intangible asset?

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Question 18

Which statement is not correct?

(Multiple Choice)

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Question 19

Explain how goodwill arises in a business. Give an example in your response.

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Question 20

Explain four differences in the recognition of externally acquired intangibles versus internally developed intangibles.

New Ventures Corp., a publicly accountable entity, capitalized the following costs: Jan 1 - April 30, 2021 May 1 - Dec. 31, 2021 Patents 10,000 12,000 Copyrights 15,000 32,000 Which statement is correct?

Which statement is not correct?

What factor will not affect the estimated useful life of a finite lived intangible asset?

Which criteria under IAS 38 would be met if the "project has a dedicated group of qualified staff"?

Which statement is correct?

Explain the accounting for assets in the mineral resource exploration industry.

Explain how earnings can be manipulated through choices made in the estimated useful lives for intangible assets.

Explain how government grants are accounted for and presented in the financial statements.

Assume that a company has spent $1 million during the year and is deciding whether these costs should be expensed as research costs or capitalized as development costs. Explain the impact of undercapitalization of development costs on the financial statements.

Which of the following is not a parameter of amortization?

Which of the following is not a characteristic of intangible assets?

Which of the following is not a characteristic of an intangible asset?

Which statement is not correct?

Explain how goodwill arises in a business. Give an example in your response.

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, Plant and Equipment

Applications of Fair Value to Non-Current Assets

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