Question 1

Which of the following represents a privilege granted by a government to use public property in performing services?

Accepted Answer

The answer of Which of the following represents a privilege...

Question 2

The asset turnover ratio is calculated by dividing cost of goods sold by average total assets.

Accepted Answer

The asset turnover ratio is calculated by dividing net sales or revenue by average total assets, not the cost of goods sold.

Question 3

On January 1, 2017, Ellis, Inc. purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. Journalize the amortization expense for 2017. Assume straight-line amortization.

Accepted Answer

The answer of On January 1, 2017, Ellis, Inc. purchased...

Question 4

If a company uses the contra account, Accumulated Amortization, this account is typically shown on the balance sheet.

Accepted Answer

The answer of If a company uses the contra account,...

Question 5

Server Solutions paid $211,000 to acquire Tabletz, Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $211,000 and liabilities of $105,500. The fair market value of Tabletz's assets was $211,000. The fair market value of its liabilities was $105,500. How much goodwill did Server Solutions purchase as part of the acquisition of Tabletz?

Accepted Answer

C)
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Question 6

On October 1, 2017, Nurix, Inc. purchased a patent for $100,000 cash. Although the patent gives legal protection for 20 years, it is expected to be used for only eight years. Journalize the purchase of the patent.

Accepted Answer

The answer of On October 1, 2017, Nurix, Inc. purchased...

Question 7

On January 1, 2015, Alda Solutions paid $200,000 to acquire Fancy Phones, Inc., an electronic gadget-advertising website. At the time of the acquisition, Fancy Phone's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Fancy Phone's assets was $200,000. The fair market value of its liabilities was $100,000. At the end of 2018, goodwill was measured, and its fair value was determined to be $60,000. Record the impairment of goodwill.

Accepted Answer

The answer of On January 1, 2015, Alda Solutions paid...

Question 8

Which of the following is an asset that represents distinctive identifications of a product or service?

Accepted Answer

A trademark is a symbol, word, or phrase that represents distinctive identifications of a product or service. A license is a legal agreement granting permission to use a specific product or service. Copyright is a legal right given to creators of original work. A franchise is a business model that allows individuals to own and operate their own business using a parent company's brand and business model.

Question 9

On October 1, 2017, Mulcahy, Inc. purchased a patent for $100,000 cash. Although the patent gives legal protection for 20 years, it is expected to be used for only eight years. Journalize the amortization expense for 2017. Assume straight-line amortization.

Accepted Answer

The answer of On October 1, 2017, Mulcahy, Inc. purchased...

Question 10

Which of the following is the correct accounting treatment for a patent?

Accepted Answer

A patent is an intangible asset and is required to be capitalized and amortized over its useful life or legal life, whichever is shorter. The useful life of a patent is usually between 10-20 years, so it must be amortized over that period.

Question 11

Which of the following statements, regarding the reporting of intangible assets, is correct?

Accepted Answer

The answer of Which of the following statements, regarding the...

Question 12

In 2017, a corporation purchased a small business for $250,000. The market value of the small business's assets was $400,000, and the market value of the liabilities was $200,000. The corporation recorded goodwill of $50,000 at the time of acquisition. At the end of 2018, it measured goodwill and found it had a remaining fair value of only $20,000. At year-end 2018, the corporation will ________.

Accepted Answer

The decrease in the fair value of goodwill from $50,000 to $20,000 indicates that there has been an impairment loss. Therefore, the corporation will need to record an impairment loss at the end of 2018.

Question 13

On October 1, 2017, Nurix, Inc. purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. What will be the balance in the patent account on September 30, 2018?

Accepted Answer

A)Amortization expense = (Cost - Residual value)/ Useful life
Amortization expense = ($200,000 - 0)/ 10 = $20,000
Balance at the end of first year = $200,000 - $20,000 = $180,000

Question 14

Which of the following is an intangible asset?

Accepted Answer

Goodwill is an intangible asset that represents the value of a company's brand name, customer relationships, and other intangible qualities that contribute to its success. Plant and machinery, building, and land are all tangible assets.

Question 15

Which of the following statements about franchises is correct?

Accepted Answer

Franchises are agreements in which a business grants another business the right to use its name, products, and processes to sell goods or services under certain conditions. The franchisee (the business that receives the franchise) typically pays an initial fee and ongoing royalties to the franchisor (the business that grants the franchise). Therefore, option C is the correct statement.

Question 16

Which of the following is true of goodwill?

Accepted Answer

Goodwill is not amortized but is subject to a periodic impairment test. The value of goodwill is determined by subtracting the fair market value of net assets acquired from the purchase price of the acquisition. It is then recorded as an asset on the balance sheet.

Question 17

Gideon Electronics paid $200,000 to acquire Tabletz, Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Tabletz's assets was $200,000. The fair market value of its liabilities was $100,000. Journalize the acquisition of Tabletz in the books of Gideon Electronics.

Accepted Answer

The answer of Gideon Electronics paid $200,000 to acquire Tabletz,...

Question 18

The type of intangible asset related to the exclusive right to reproduce and sell a book or intellectual property is a ________.

Accepted Answer

Copyrights pertain to ownership of works such as literature, art, music, and software. It grants the creator exclusive rights to reproduce, distribute, and sell their work. Franchise pertains to a type of licensing agreement, trademark pertains to a name, symbol, or logo which identifies the source of goods or services, and patent pertains to the ownership of an invention, process, or idea for a certain period of time.

Question 19

Which of the following accounting methods is generally used to compute amortization expense?

Accepted Answer

Straight-line method is generally used to compute amortization expense.

Question 20

The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested.

Accepted Answer

The asset turnover ratio formula is net sales divided by average total assets. It measures how efficiently a company uses its assets to generate sales.

Quiz 10: Plant Assets, Natural Resources, and Intangibles