Question 1

Losses on the cash sale of capital assets:

Accepted Answer

Losses on the cash sale of capital assets occur when the cash proceeds from the sale are less than the carrying value (or book value) of the asset. Therefore, the correct option is C, which states that the losses are the excess of the carrying value of the asset over the cash proceeds. Option A is incorrect because it describes the calculation for gains on the cash sale of capital assets. Option B is incorrect because the market value of the asset is not relevant in calculating the loss. Option D is also incorrect because it describes the calculation for impairments, which is not the same as a loss on the cash sale of an asset.

Question 2

Which of the following statements is true with respect to intangible assets with indefinite lives?

Accepted Answer

Intangible assets with indefinite lives are not amortized but are reviewed annually for impairment in value. If an impairment has occurred, the asset's value is written down on the balance sheet.

Question 3

Harmax Limited had spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year.How should the patent be reflected in the financial statements?

Accepted Answer

The full $25,000 should be capitalized as a Patent asset because both the registration and defense costs are directly attributable to securing the patent and ensuring its future economic benefits.

Question 4

Which of the following is an example of an intangible with an indefinite life?

Accepted Answer

Goodwill value assigned to the excess purchase price when purchasing a company is an example of an intangible with an indefinite life as its value is based on the reputation and market position of the company and is not limited by a specific time frame. Copyrights, patents, and development costs of a drug have limited lives and are considered intangibles with definite lives.

Quiz 8: Capital Assetstangible and Intangible

Losses on the cash sale of capital assets:

Which of the following statements is true with respect to intangible assets with indefinite lives?

Harmax Limited had spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year.How should the patent be reflected in the financial statements?

Which of the following is an example of an intangible with an indefinite life?