Deck 16: Intangible Assets

Question 1

Which of the following intangible assets are not amortized?

A) Patent
B) Impaired goodwill
C) Licensing agreement
D) Copyrights
E) All of the above are amortized

Answer 1

Impaired goodwill

Question 2

Which of the following intangible assets are identifiable?

A) Internally generated goodwill
B) Internally generated brand equity
C) Client list
D) Purchased brand trademark
E) None of the above are identifiable

Answer 2

Purchased brand trademark

Question 3

Which of the following does not necessarily satisfy a criteria for recognizing intangible assets in the development phase?

A) It is technically feasible to complete the intangible asset
B) The intangible asset will likely generate future economic benefit
C) The intangible was heavily marketed
D) Adequate resources are available to complete the intangible asset
E) All of the above satisfy a criteria

Answer 3

The intangible was heavily marketed

Question 4

Which of the following activities must be immediately expensed (may not be capitalized)?

A) Brainstorming a new idea
B) Concept sketches and renderings
C) Creating clay models of the concept
D) Testing the concept for a specific market
E) More than one of the above must be immediately expensed

Question 5

Which method of amortization is most appropriate for a situation in which most of the asset's future benefits occur in the earlier years?

A) Straight-line method
B) Unit of production method
C) Reducing balance method
D) All of the above are equally appropriate

Question 6

An intangible asset is recognized if, and only if, which of the following key criteria are met?

A) It is probable that there will be future economic benefits from the asset to the entity.
B) The cost of the asset can be measured reliably.
C) The asset's fair value can be determined.
D) A and B
E) A and C
F) B and C

Question 7

The cost of generating other internally generated intangible assets is divided which of the following phase(s)?

A) A research phase.
B) A feasibility phase.
C) A development phase.
D) A product viability phase.
E) A and B
F) A and C
G) B and D
H) A, B, and C
I) All of the above

Question 8

After initial recognition, intangible assets are usually measured using

A) the fair value model.
B) the cost model.
C) the feasibility model.
D) the active market model.

Question 9

An entity may elect to apply the revaluation model to measure the intangible asset at fair value

A) if an active market for the asset exists.
B) if the intangible asset's value is greater than its cost
C) if industry practice is to revalue intangible assets
D) if the revaluation is approved by the board of directors

Question 10

Each part of an intangible asset with a cost that is significant in relation to the total cost of the item should be amortized separately. This is known as

A) residual value accounting
B) cost accounting
C) amortization accounting
D) component accounting

Question 11

Intangibles can only be generated internally.

Question 12

Word processors software would be considered a tangible asset.

Question 13

Hampshire Borough Proprietaries specializes in brokering patents and trademarks. Hampshire Borough would include these intangible assets at fair market value on their statements of financial position.

Question 14

Shappirim Palms developed a new brand name and trademarked it. It wasn't initially clear but it soon became clear that the expected future economic benefits attributable to the brand name will most likely flow to the entity. In fact, the economic benefits resulting from the brand name will soon surpass prior expectations. The cost of the brand name can be reliably measured. The CFO tells you that the brand name can be recognized as an identifiable, intangible asset now that the future economic benefits are more probable.

Question 15

In general, the revaluation model is cheaper and easier to implement than the cost model.

Question 16

Intangible assets are identifiable non-monetary assets without physical substance.

Question 17

Internally generated brands, mast?heads, publishing titles, customer lists, other similar items, or expenditures on internally generated goodwill are examples of intangible assets.

Question 18

All costs incurred during the research phase are recognized as expenses in profit or loss.

Question 19

Development costs are capitalized as an intangible asset when technical and economic feasibility of a project can be demonstrated.

Question 20

The cost of an intangible asset acquired as part of a business com?bination is its fair value at the date of acquisition.

Question 21

Star Valley Entity just purchased Waterton Canyon Entity along with its patented technology for $105 million. The fair value of the company excluding the patent is $70 million. The patent's fair value is $20 million. What intangible assets should Star Valley record?

Question 22

Chatton Wooler-Scots Chemical located in Berwick-Upon-Tweed created a new chemical. Research and development costs were indistinguishable during its creation. The new chemical is called Chromoethylene, and it is used to increase the strength and UV resistance of plastics. Chatton Wooler-Scots uses the revaluation model of accounting for intangible assets. Chromoethylene was patented three years ago for 50 years. The new patent was originally valued at ₤4.5 billion and has increased in fair market value from ₤4.5 billion to ₤5 billion during the last year. Accumulated amortization is ₤270 million. Chatton Wooler-Scots uses the straight-line method of amortization. Prepare journal entries using the proportional restatement and eliminating amortization methods.

Question 23

Chatton Wooler-Scots Chemical has chemical formula patents that it has purchased. Chatton Wooler-Scots uses the revaluation method of intangible asset valuation. The patents were revalued at the end of the first year and the carrying amount of the patents decreased by ₤5 million. At the end of year two, the carrying value of the patents increased ₤3 million. During year three, the carrying value of the patents decreased by ₤4 million. At the end of year four, the carrying value of the patents increased by ₤10 million. Ignoring amortization, what is the balance of the revaluation surplus account and the amount of profit/loss recognized each year?

Question 24

Intangible assets acquired in a business combination are recognized as assets distinct from goodwill if they are identifiable, what criteria must intangibles must meet to be identifiable?

Question 25

Remedy Medical Devise Entity (RMDE) built a loyal portfolio of customers. RMDE expects that the customers will continue to trade with the entity. Explain why or why not the definition of an intangible asset may have met.

Question 26

Port Entity owns a specific software that is used to operate computer-controlled crane simulators. These simulators cannot operate without this software since it is an integral part of the related hardware. Explain why or why not the definition of an intangible asset has been met.

Question 27

Soaring Entity (UE) developed a successful brand for a line of custom-made para-gliders. SE is able to charge a premium for its products because of its superior reputation. SE spends large amounts of money on developing, marketing, and maintaining the brand. Explain why or why not the definition of an intangible asset has been met.

Question 28

On January 1, 20X7 I-Tech Entity (IE) acquired a patent that expires in ten years for $150,000 in a business combination. IE expects to produce the patented product for the next six years, discontinuing the product line at the end of that time period. IE has a commitment from Advanced Company (AC) to purchase the patent in six years for 20% of its fair value on the date the patent is acquired. Management believes that the straight-line method of amortization reflects the pattern in which the entity expects to consume the patent's future economic benefits. What is the journal entry IE will record on December 31, 20X7?