Question 1

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

Accepted Answer

A) Legal life of the asset. 
B) Technological obsolescence. 
C) Physical condition of the asset. 
D) Certainty of future cash flows.

Question 2

In 2021, StartUp Inc. (SU)set up a new manufacturing facility in Manitoba. To encourage SU to set up its factory, the province provided equipment with a fair market value of $45,000 and an estimated useful life of 5 years using straight-line depreciation. What journal entry would be required in fiscal 2022, if the net method is used?

Accepted Answer

A) No entry is required. 
B) A credit to other comprehensive income - donated assets of $9,000. 
C) A credit to deferred income of $9,000. 
D) A credit to accumulated depreciation for $9,000.

Question 3

Patent Corp., a publicly accountable entity, incurred the following costs: $$\begin{array} { | l | r | } 
\hline\text { Purchase of patents } & 18,000 \
\hline \text { Development of economic goodwill } & 12,000 \
\hline \text { Legal costs to successfully defend trademark } & 32,000 \
\hline \text { Lawsuit to successfully defend product brand } & 15,000 \
\hline
\end{array}$$
 How much of the costs can be capitalized as intangible assets?

Accepted Answer

A) $18,000 
B) $50,000 
C) $65,000 
D) $77,000

Question 4

Listed below are several transactions that occurred during the year. In each case, all the amounts were debited to an account called "R and D costs." At the end of the year the company wants this account closed out and the amounts either expensed or capitalized to an asset account called "Development costs." a. During the year $5,500,000 was paid to staff to investigate whether a drug combination was effective for reducing a specific type of cancer in mice. Evidence showed it materially reduced the effects of this cancer in the mice.
b. During the year $12,000,000 was paid to staff to investigate whether a drug combination was effective for reducing a specific type of cancer for terminally ill cancer patients. The trials were successful in a limited number of cases but the results were mixed.
c. During the year $44,000,000 was paid to staff to investigate whether a drug combination was effective in reducing a specific type of cancer. The drug was very successful in most cases. Market research shows a huge market for this drug. The Board has committed further resources to complete the development of this project and to market the drug.
d. During the year $41,000,000 was paid to staff to investigate whether a drug combination was effective in reducing a specific type of cancer. The drug combination was very successful in most cases. Market research shows huge a market for this drug combination. The company is too small and does not have adequate funds to complete the balance of the drug testing, so it is looking for a large pharmaceutical firm to take it over and complete the process.
Required:
Prepare the journal entry required for each case. Explain your proposed treatment.

Accepted Answer

The answer of Listed below are several transactions that occurred...

Question 5

Which statement is not correct?

Accepted Answer

A) Significant uncertainties exist during mineral exploration. 
B) Entities can choose to either capitalize or expense mineral exploration costs. 
C) IFRS 6 applies when the mineral resources enter the development phase. 
D) Under IFRS, all costs must be expensed if a mineral site is not worthy of further exploration.

Question 6

Kryan Corp. mines and produces aluminum. During 2021, the company explored two new sites and evaluated them for aluminum ore potential. By the December 31, 2021 year-end, both sites remained in the evaluation stage. During 2022, evaluation of site Apollo was completed and the site was deemed to have sufficient quantities of ore; consequently, development of the site began. However, site Braeden was determined to have ore concentrations too low to be commercially viable. The following is the cost of exploration and evaluation incurred on the two sites:
 $$\begin{array} { | l | r | r | } 
\hline & 2021 & 2022 \
\hline \text { Apollo (A Site) } & \$ 1,569,000 & \$ 1,560,000 \
\hline \text { Braeden (B Site) } & \underline { 550,000 } & \underline { 1,275,000 } \
\hline & \$ 2,119,000 & \$ 2,835,000 \
\hline
\end{array}$$ Required:
Record the journal entries in 2021 and 2022 relating to the exploration and evaluation costs using the successful efforts method. Assume that Kryan has a policy of capitalizing the costs of exploration and evaluation.

Accepted Answer

The answer of Kryan Corp. mines and produces aluminum. During...

Question 7

How does IFRS require that government grants for property, plant and equipment (PPE)be recorded?

Accepted Answer

A) The government grant should be recorded using the income approach. 
B) The government grant should be recorded using the capital approach. 
C) The government grant should not be recorded using either the income or capital approach. 
D) IFRS do not provide any guidance for recording government grant.

Question 8

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 capitalized as "property, plant or equipment" under the full cost method?

Accepted Answer

A) $100,000 
B) $200,000 
C) $300,000 
D) $700,000

Question 9

Which of the following is not a difference between intangible assets and property, plant and equipment (PPE)?

Accepted Answer

A) Intangibles do not have physical substance. 
B) PPE and intangibles benefit for more than one year. 
C) Intangibles are not held for use in the ordinary course of business. 
D) PPE are held for use in the ordinary course of business.

Question 10

Which statement is correct?

Accepted Answer

A) Costs can continue to be capitalized in the post development phase. 
B) The project must meet IAS 38 criteria before development costs can be capitalized. 
C) The development phase includes generating new ideas or searching for new materials. 
D) The research phase includes designing, constructing or testing a prototype.

Question 11

Which statement is correct?

Accepted Answer

A) In the exploration phase, the mineral site is ready for mineral production. 
B) In the extraction phase, the mineral site is assessed for commercial viability. 
C) In the extraction phase, the mineral site is assessed for technical viability. 
D) In the development phase, the mineral site is prepared for resource extraction.

Question 12

Xavier Corp capitalized exploration and evaluation costs of $470,000. A further $1,357,000 was spent on tangible property, plant, and equipment to develop an oil well. Reserves at the beginning of the year were 480,000 barrels. During the year, the Corp produced 57,600 barrels of oil.
Calculate the amounts for depletion and depreciation.

Accepted Answer

The answer of Xavier Corp capitalized exploration and evaluation costs...

Question 13

Which statement is not correct?

Accepted Answer

A) Assessing the useful life of an intangible asset requires professional judgment. 
B) The residual value of an intangible asset is the same as the asset's salvage value. 
C) The straight-line method of amortization is generally used for intangible assets. 
D) The straight-line method of amortization achieves an equal pattern of cost allocation.

Question 14

Which statement is correct?

Accepted Answer

A) In the development phase, the mineral site is ready for mineral production. 
B) In the development phase, the mineral site is assessed for commercial viability. 
C) In the development phase, the mineral site is assessed for technical viability. 
D) In the development phase, the six criteria required for capitalization are met.

Question 15

Explain the difference between indefinite lived and finite lived intangible assets.

Accepted Answer

The answer of Explain the difference between indefinite lived and...

Question 16

Which of the following is correct with respect to the accounting for re-payment of government grants?

Accepted Answer

A) Accounted for prospectively under IFRS. 
B) Accounted for retrospectively under ASPE. 
C) Partial prospective treatment and partial retrospective treatment under ASPE. 
D) Partial prospective treatment and partial retrospective treatment under IFRS.

Question 17

Growth Corp., a publicly accountable entity, purchased a company with the following assets and liabilities for $97,000: $$\begin{array} { | l | r | r | } 
\hline & \text { Carrying value } & \text { Fair value } \
\hline \text { Inventories } & 18,000 & 17,000 \
\hline \text { Equipment } & 12,000 & 10,000 \
\hline \text { Intangible assets } & 32,000 & 40,000 \
\hline \text { Accounts payable } & 10,000 & 15,000 \
\hline \text { Long-term liabilities } & 10,000 & 15,000 \
\hline
\end{array}$$ Which of the following is not correct?

Accepted Answer

A) Accounting goodwill of $55,000 will be recorded. 
B) Accounting goodwill of $60,000 will be recorded. 
C) The fair value of net tangible assets is $27,000. 
D) Equipment could have a lower fair value due to decreased productive capacity.

Question 18

What is the appropriate treatment for re-payment of government grants under ASPE?

Accepted Answer

A) Accounted for prospectively. 
B) Accounted for retrospectively. 
C) Partial prospective treatment and partial retrospective treatment. 
D) Full prospective treatment and full retrospective treatment.

Question 19

What is the appropriate treatment for re-payment of government grants under IFRS?

Accepted Answer

A) Accounted for prospectively. 
B) Accounted for retrospectively. 
C) Partial prospective treatment and partial retrospective treatment. 
D) Full prospective treatment and full retrospective treatment.

Question 20

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 capitalized as "property, plant or equipment" under the successful efforts method?

Accepted Answer

A) $100,000 
B) $200,000 
C) $300,000 
D) $700,000

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

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

Which statement is not correct?

How does IFRS require that government grants for property, plant and equipment (PPE) be recorded?

Which of the following is not a difference between intangible assets and property, plant and equipment (PPE) ?

Which statement is correct?

Which statement is correct?

Which statement is not correct?

Which statement is correct?

Explain the difference between indefinite lived and finite lived intangible assets.

Which of the following is correct with respect to the accounting for re-payment of government grants?

What is the appropriate treatment for re-payment of government grants under ASPE?

What is the appropriate treatment for re-payment of government grants under IFRS?