Intermedia Accounting 1 Ch 12

Chapter 12 Quiz

Q1/ Which of the following does not describe intangible assets? a) They are financial instruments. instruments. b) They are classified as long-term assets. c) They provide long-term benefits. d) They lack physical existence.

Q2 / Costs incurred internally to create intangibles are a) capitalized. b) expensed as incurred. c) expensed only only if they have a limited life. d) capitalized if they have an indefinite life.

Q3 / Which of the following methods of amortization is normally used for intangible assets? a) Sum-of-the-years'-dig Sum-of-the-years'-digits its b) Double-declining-balance Double-declining-balance c) Units of production production d) Straight-line Q4 / Factors considered in determining determining an intangible asset’s useful life include all of the following except  a) any provisions for renew renewal al or extension of the asset’s legal life. b) any legal or contractual provisions provisions that may limit the useful life. c) the amortization method used. d) the expected use of the asset.

Q5 / Which of the following is not  an intangible asset? a) Research and development costs b) Copyrights c) Franchise d) Trade name

Q6 / When a patent is amortized, the credit is usually (in the textbook) made to

a) an expense account. account. b) the Patent account. c) an Accumulated Amortization Amortization account. account. d) a Deferred Credit account.

Q7 / When a new company is acquired, which of these intangible assets, unrecorded on the acquired company’s books, might be recorded in addition to goodwill? a) A brand name. b) A patent. c) A customer customer list. d) All of the above.

Q8 / Goodwill may be recorded when: a) one company acquires acquires another in a business combination. b) the fair value of a company’s assets exceeds their cost. c) it is identified within within a company. d) a company has exceptional customer relations.

Q9 / Purchased goodwill should a) not be amortized. b) be written off as soon as possible as an extraordinary item. c) be written off by systematic charges as a regular operating expense over the period benefited. d) be written off as soon as possible against retained earnings.

Q10 / The reason goodwill is sometimes referred to as a master valuation account is because a)

it is the difference between the fair value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business.

b) it represents the purchase price of a business that is about to be sold. c)

it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

d)

the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation.

Q11 / The recoverability test is used to determine any impairment loss on which of the following types of  intangible assets? a) Goodwill. b) Indefinite life intangibles other than goodwill. goodwill. c) Indefinite life intangibles. d) Limited life intangibles. intangibles.

Q12 / How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement? a) Must be expensed in the period incurred. b)

Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure expenditure will have alternative future uses or unless contractually reimbursable.

c)

May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.

d) Must be capitalized when incurred and then amortized over their estimated useful lives.

Q13 / Which of the following is considered research and development costs? a) Planned search or critical investigation aimed at discovery of new knowledge. b)

Translation of research findings or other knowledge into a plan or design for a new product or process.

c)

Translation of research findings or other knowledge into a significant improvement improvement of an existing product.

d) all of the above.

Q14 / Which of the following research and development related costs should be capitalized and depreciated over current and future periods? a)

Research findings purchased from another company to aid a particular research project currently in process

b)

Research and development development general laboratory building which can be put to alternative uses in the future

c) Inventory used used for a specific research project project d) Administrative Administrative salaries allocated to research and development development

Q15 / Which of the following principles best describes the current method of accounting for research and development costs? a) Systematic and rational allocation allocation b) Immediate recognition as an expense c) Income tax minimization d) Associating cause and effect

Q16 / 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 a) research and development expense in the period(s) of construction. b) depreciation or immediate write-off depending on company policy. c) depreciation deducted as part of research and development costs. d)

an expense at such time as productive research and development has been obtained from the facility.

Q17 / Operating losses incurred during the start-up years of a new business should be a) capitalized as an intangible asset and amortized over a period not to exceed 20 years. b) written off directly against retained earnings. earnings. c) capitalized capitali zed as a deferred charge and amortized over five years. d) accounted for and reported like the operating losses of any other business. Q18 / Which of the following should be reported under the “Other Expenses and Losses” section of the income statement? a) Goodwill impairment impairment losses. b) Trade name amortization expense. c) Patent impairment impairment losses d) None of the above.

Q19 / Intangible assets are reported on the balance sheet a) with an accumulated depreciation depreciation account. b) in the property, plant, and equipment section. c) separately from other assets. d) none of the above.

Q20 / When developing computer software to be sold, which of the following costs should be capitalized? a) Designing. b) Coding. c) Testing. d) None of the above.

Q21 / Which of the following characteristics do intangible assets possess? a) Physical existence. existence. b) Claim to a specific amount of of cash in the future. c) Held for resale. d) Long-lived.

Q22 / Which of the following intangible assets could not be sold by a business to raise needed cash for a capital project? a) Brand Name. b) Copyright. c) Patent. d) Goodwill.

Q23 / Which intangible assets are amortized?

1) a 2) b 3) c 4) d

Q24 / Wriglee, Inc. went to court this year and successfully defended defended its patent from infringe-ment by a competitor. competitor. The cost of this defense should be charged to a) legal fees and amortized over 5 years or less. b) patents and amortized over over the legal life of the patent. c) expenses of the period. d) patents and amortized over over the remaining useful life of the patent.

Q25 / Broadway Corporation was granted a patent on a product on January 1, 2001. To protect its patent, the corporation purchased on January 1, 2012 a patent on a competing product which was originally issued on January 10, 2008. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be a) amortized over a maximum period of 16 years. b) amortized over a maximum period of 9 years. c) amortized over a maximum period of 20 years. d) expensed in 2012.

Q26 / When a new company is acquired, which of these intangible assets, unrecorded on the acquired company’s books, might be recorded in addition to goodwill? a) A brand name. b) A patent. c) A customer customer list. d) All of the above.

Q27 / Easton Company and Lofton Company were combined in a purchase transaction. Easton was able to acquire Lofton at a bargain price. The sum of the fair values of identifiable assets acquired acquired less the fair value of liabilities assumed exceeded the cost to Easton. Proper accounting treatment by Easton is to report the excess amount as a) A gain. b) a deferred credit and amortize it. c) part of current income in the year year of combination. d) paid-in capital.

Q28 / Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are)

a) a b) b c) c d) d

Q29 / The carrying amount of an intangible is a) the asset's acquisition cost less the total related amortization amortization recorded to date. b) the assessed value of the asset for intangible tax purposes. purposes. c) equal to the balance of the related accumulated amortization amortization account. d) the fair value of the asset at a balance sheet date.

Q30 / Research and development costs a) are intangible assets. assets. b) may result in the development of a patent. c) are easily identified with with specific projects. d) all of the above.

Q31 / Which of the following would not be considered an R & D activity? a) Adaptation of an existing capability to a particular requirement or customer's need. b) Laboratory research aimed at discovery of new knowledge. c) Searching for applications applications of new research findings. findings. d) Conceptual formulation and design of possible product or process alternatives.

Q32 / Which of the following is often reported as an extraordinary extraordinary item? a) Amortization expense. b) Impairment Impairment losses for intangible assets other than goodwill. c) Impairment losses on goodwill. d) None of the above.

Q33 / Which of the following intangible assets should be shown as a separate item on the balance sheet? a) Goodwill b) Franchise c) Trademark d) Patent

Q34 / Which of the following costs incurred internally to create an intangible asset is generally expensed? a) Research and development costs. b) Filing costs. c) Legal costs. d) All of the above.

Q35 / In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as: a) direct costs. b) other assets. c) indirect costs. d) goodwill.

Q36 / A loss on impairment of an intangible asset is the difference between the asset’ s a) fair value and the expected future net cash flows. b) carrying amount and the expected future net cash flows. c) book value and its fair value. d) carrying amount and its fair value.

Q37 / Which of the following costs should be capitalized in the year incurred? a) Research and development costs. b) Costs to successfully defend a patent. c) Organizational costs. d) Costs to internally generate goodwill.

Q38 / Which of the following costs should be excluded  from research and development expense? a) Acquisition of R & D equipment for use on a current cu rrent project only b)

Engineering activity required to advance the design of a product to the manufacturing stage

c) Modification of the design of a product d) Cost of marketing research for a new product

Q39 / Which of the following costs incurred with developing computer software for internal use should be capitalized? a) Evaluation of alternatives. b) Maintenance. c) Training. d) Coding.