Deck 12: Intangible Assets

Question 1

Some intangible assets are not required to be amortized every year.

Answer 1

True

Question 2

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

Answer 2

True

Question 3

The impairment test for goodwill is conducted based on the cash-generating unit to which the goodwill has been assigned.

Answer 3

True

Question 4

The cost of purchased patents should be amortized over the remaining legal life of the patent.

Question 5

Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.

Question 6

Impairment testing is conducted annually for both limited-life and indefinite-life intangible assets.

Question 7

If the recoverable amount of an indefinite-life intangible other than goodwill is less than its carrying value, an impairment loss must be recognized.

Question 8

Intangible assets derive their value from the right (claim) to receive cash in the future.

Question 9

Research phase costs are capitalized as an intangible asset once economic viability.

Question 10

A cash-generating unit is the smallest identifiable group of assets in a business that can generate cash flow independently of the cash flows from the business's other assets.

Question 11

Companies are required to assess the estimated useful life and salvage value of intangible assets at least annually.

Question 12

Internally generated goodwill should not be capitalized in the accounts.

Question 13

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

Question 14

Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.

Question 15

All research phase and development phase costs are expensed as incurred.

Question 16

Recoveries of impairments for intangible long-lived asset are reported in "other income and expense" on the income statement.

Question 17

The cost of acquiring a customer list from another company is recorded as an intangible asset.

Question 18

If a new patent is acquired through modification of an existing patent, the remaining book value of the original patent may be amortized over the life of the new patent.

Question 19

Amortization of limited-life intangible assets should not be impacted by expected residual values.

Question 20

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

Question 21

Under current accounting practice, intangible assets are classified as

A)amortizable or unamortizable.
B)limited-life or indefinite-life.
C)specifically identifiable or goodwill-type.
D)legally restricted or goodwill-type.

Question 22

Which characteristic is not possessed by intangible assets?

A)Physical existence.
B)Identifiable.
C)Result in future benefits.
D)Expensed over current and\or future years.

Question 23

Which of the following characteristics do intangible assets possess?

A)Physical existence.
B)Claim to a specific amount of cash in the future.
C)Long-lived.
D)Held for resale.

Question 24

After an impairment loss is recorded for goodwill, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Question 25

Which of the following does not describe intangible assets?

A)They lack physical existence.
B)They are monetary assets.
C)They provide long-term benefits.
D)They are classified as long-term assets.

Question 26

Which intangible assets are amortized?

Question 27

Which of the following methods of amortization is normally used for intangible assets?

A)Sum-of-the-years'-digits
B)Straight-line
C)Units of production
D)Double-declining-balance

Question 28

Costs incurred internally to create intangibles are

A)capitalized.
B)capitalized if they have an indefinite life.
C)expensed as incurred.
D)expensed only if they have a limited life.

Question 29

Accounting for impairments for limited-life intangible assets follows the same rules used to account for impairments of plant and equipment.

Question 30

A recovery of impairment for an intangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred.

Question 31

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

Question 32

Research and development costs are recorded as an intangible asset if it is felt they will provide economic benefits in future years.

Question 33

IFRS permits reversals of impairment losses for all limited and indefinite-life intangible assets.

Question 34

Which of the following costs incurred internally to create an intangible asset is generally expensed?

A)Research phase costs.
B)Filing costs.
C)Legal costs.
D)All of the above.

Question 35

Contra accounts must be reported for intangible assets in a manner similar to the reporting of property, plant, and equipment.

Question 36

IFRS requires start-up costs and initial operating losses during the early years be capitalized.

Question 37

The cost of an intangible asset includes all of the following except

A)purchase price.
B)legal fees.
C)other incidental expenses.
D)all of these are included.

Question 38

Factors considered in determining an intangible asset's useful life include all of the following except

A)the expected use of the asset.
B)any legal or contractual provisions that may limit the useful life.
C)any provisions for renewal or extension of the asset's legal life.
D)the amortization method used.

Question 39

Periodic alterations to existing products are an example of research and development costs.

Question 40

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

Question 41

In a business combination, the excess of the cost of the purchase over the fair value of the identifiable net assets purchased is:

A)other assets.
B)indirect costs.
C)goodwill.
D)a bargain purchase.

Question 42

Wriglee, Inc.went to court this year and successfully defended its patent from infringe-ment by a competitor.The cost of this defense should be charged to

A)patents and amortized over the legal life of the patent.
B)legal fees and amortized over 5 years or less.
C)expenses of the period.
D)patents and amortized over the remaining useful life of the patent.

Question 43

Purchased goodwill should

A)be written off as soon as possible against retained earnings.
B)be written off as soon as possible as an other expense item.
C)be written off by systematic charges as a regular operating expense over the period benefited.
D)not be amortized.

Question 44

When a patent is amortized, the credit is usually made to

A)the Patent account.
B)an Accumulated Amortization account.
C)an Accumulated Depreciation account.
D)an expense account.

Question 45

Which of the following intangible assets could not be sold by a business to raise needed cash for a capital project?

A)Patent.
B)Copyright.
C)Goodwill.
D)Trade name.

Question 46

Recovery of impairment is recognized for all the following except

A)Patent held for sale.
B)Patent held for use.
C)Trademark.
D)Goodwill.

Question 47

A loss on impairment of an intangible asset is the difference between the asset's

A)carrying amount and the expected future net cash flows.
B)carrying amount and its recoverable amount.
C)recoverable amount and the expected future net cash flows.
D)book value and its fair value.

Question 48

Goodwill may be recorded when:

A)it is identified within a company.
B)one company acquires another in a business combination.
C)the fair value of a company's assets exceeds their cost.
D)a company has exceptional customer relations.

Question 49

Broadway Corporation was granted a patent on a product on January 1, 2000.To protect its patent, the corporation purchased on January 1, 2011 a patent on a competing product which was originally issued on January 10, 2007.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 20 years.
B)amortized over a maximum period of 16 years.
C)amortized over a maximum period of 9 years.
D)expensed in 2011.

Question 50

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

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 51

All of the following are true regarding recovery of impairments for intangible assets except:

A)After a recovery of impairment has been recognized, the carrying value of the asset reported on the statement of financial position will be the higher of the fair value less cost to sell or the value-in-use.
B)No recovery of impairment is allowed for Goodwill.
C)A recovery of impairment will be reported in the "Other income and expense" section of the income statement.
D)The amount of the recovery is limited to the carrying value of the asset that would have been reported had no impairment occurred.

Question 52

The intangible asset goodwill may be

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 53

Which of the following is not an intangible asset?

A)Trade name
B)Research and development costs
C)Franchise
D)Copyrights

Question 54

Which of the following intangible assets should not be amortized?

A)Copyrights
B)Customer lists
C)Perpetual franchises
D)All of these intangible assets should be amortized.

Question 55

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

A)Research and development general laboratory building which 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 56

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

A)it represents the purchase price of a business that is about to be sold.
B)it is the difference between the fair value of the net identifiable assets as compared with the purchase price of the acquired business.
C)the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation.
D)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.

Question 57

Which of the following principles best describes the current method of accounting for research and development costs?

A)Associating cause and effect
B)Systematic and rational allocation
C)Income tax minimization
D)Immediate recognition as an expense

Question 58

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 trade name.
B)A patent.
C)A customer list.
D)All of the above.

Question 59

When a company develops a trademark the costs directly related to securing it should generally be capitalized.Which of the following costs associated with a trademark would not be allowed to be capitalized?

A)Attorney fees.
B)Consulting fees.
C)Research and development fees.
D)Design costs.

Question 60

Which of the following is not a criteria which must be met before development costs can be capitalized?

A)The company has sufficient financial resources to complete the project.
B)The company intends to complete the project and either use or sell the intangible asset.
C)The company can reliably identify the research costs incurred to bring the project to economic feasibility.
D)The project has achieved technical feasibility.

Question 61

Which of the following is considered research and development costs?

A)Laboratory research aimed at discovery of new knowledge.
B)Application of research findings or other knowledge to a plan or design for a new product or process.
C)Conceptual formulation and design of possible product or process alternatives.
D)all of the above.

Question 62

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 deducted as part of research and development costs.
C)depreciation or immediate write-off depending on company policy.
D)an expense at such time as productive research and development has been obtained from the facility.

Question 63

Alonzo Co.acquires 3 patents from Shaq Corp.for a total of $360,000.The patents were carried on Shaq's books as follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000.When Alonzo acquired the patents their fair values were: Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000.At what amount should Alonzo record Patent BB?

A)$120,000
B)$240,000
C)$2,000
D)$270,000

Question 64

Start-up costs include organizational costs, such as legal and state fees incurred to organize a new business entity.These costs should be

A)capitalized and never amortized.
B)capitalized and amortized over 40 years.
C)capitalized and amortized over 5 years.
D)expensed as incurred.

Question 65

Mini Corp.acquires a patent from Maxi Co.in exchange for 2,500 shares of Mini Corp.'s $5 par value ordinary shares and $75,000 cash.When the patent was initially issued to Maxi Co., Mini Corp.'s shares were selling at $7.50 per share.When Mini Corp.acquired the patent, its shares were selling for $9 a share.Mini Corp.should record the patent at what amount?

A)$87,500
B)$93,750
C)$97,500
D)$75,000

Question 66

Which of the following would be considered research and development?

A)Routine efforts to refine an existing product.
B)Periodic alterations to existing production lines.
C)Marketing research to promote a new product.
D)Construction of prototypes.

Question 67

Lynne Corporation acquired a patent on May 1, 2010.Lynne paid cash of $30,000 to the seller.Legal fees of $1,000 were paid related to the acquisition.What amount should be debited to the patent account?

A)$1,000
B)$29,000
C)$30,000
D)$31,000

Question 68

Contreras Corporation acquired a patent on May 1, 2010.Contreras paid cash of $25,000 to the seller.Legal fees of $900 were paid related to the acquisition.What amount should be debited to the patent account?

A)$900
B)$24,100
C)$25,000
D)$25,900

Question 69

Which of the following costs should be capitalized in the year incurred?

A)Research and development costs.
B)Costs to internally generate goodwill.
C)Organizational costs.
D)Costs to successfully defend a patent.

Question 70

Which of the following should not be reported under the "Other income and expense" section of the income statement?

A)Goodwill impairment losses.
B)Trade name amortization expense.
C)Recovery of impairment losses
D)All of the above.

Question 71

The total amount of patent cost amortized to date is usually

A)shown in a separate Accumulated Patent Amortization account which is shown contra to the Patent account.
B)shown in the current income statement.
C)reflected as credits in the Patent account.
D)reflected as a contra property, plant and equipment item.

Question 72

How should research and development costs be accounted for, according to an IASB Statement?

A)Must be capitalized when incurred and then amortized over their estimated useful lives.
B)Must be expensed in the period incurred.
C)May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.
D)Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.

Question 73

Research and development costs

A)are intangible assets.
B)may result in the development of a patent.
C)are easily identified with specific projects.
D)all of the above.

Question 74

Which of the following costs would be capitalized?

A)Acquisition cost of equipment to be used on current research project only.
B)Engineering costs incurred to advance the product to the full production stage.
C)Cost of research to determine whether a market for the product exists.
D)Salaries of research staff.

Question 75

Jeff Corporation purchased a limited-life intangible asset for $120,000 on May 1, 2009.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2011?

A)$ -0-
B)$24,000
C)$32,000
D)$36,000

Question 76

Which of the following costs should be excluded from research and development expense?

A)Modification of the design of a product
B)Acquisition of R & D equipment for use on a current project only
C)Cost of marketing research for a new product
D)Engineering activity required to advance the design of a product to the manufacturing stage

Question 77

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)Application of research findings or other knowledge to a plan for a new product or process.
C)Laboratory research aimed at discovery of new knowledge.
D)Conceptual formulation and design of possible product or process alternatives.

Question 78

Operating losses incurred during the start-up years of a new business should be

A)accounted for and reported like the operating losses of any other business.
B)written off directly against retained earnings.
C)capitalized as a deferred charge and amortized over five years.
D)capitalized as an intangible asset and amortized over a period not to exceed 20 years.

Question 79

Which of the following intangible assets should be shown as a separate item on the statement of financial position?

A)Goodwill
B)Franchise
C)Patent
D)Trademark

Question 80

Which of the following costs would be capitalized?

A)Acquisition cost of equipment to be used on current and future research projects.
B)Engineering costs incurred to advance the project to the full production stage.
C)Cost incurred to file for patent.
D)Cost of testing prototype before economic feasibility has been demonstration.