Question 1

Under the fair value option,an investment in the common stock of another entity will be

Accepted Answer

The answer of Under the fair value option,an investment in...

Question 2

Which of the following assets acquired in 2017 are amortizable? Goodwill Trademarks

Accepted Answer

Goodwill is not amortizable, it is tested for impairment annually. Trademarks are amortizable over their useful life.

Question 3

Goodwill is an intangible asset

Accepted Answer

The answer of Goodwill is an intangible asset
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Question 4

An activity that would be expensed currently as research and development costs is the

Accepted Answer

Testing in search for or evaluation of product or process alternatives is typically considered as part of research and development efforts and would be expensed as such. The other options - adaptation of an existing capability, legal work, and engineering follow-through - may also be associated with research and development, but they may have other classifications or treatments under accounting standards.

Question 5

Zink Company owns 32% of Ace Company's outstanding voting stock.Zink Company normally should account for its investment in Ace Company using the

Accepted Answer

According to the generally accepted accounting principles (GAAP), if a company owns between 20% and 50% of another company's outstanding voting stock, it should use the equity method to account for its investment. Therefore, the best choice for Zink Company would be the equity method.

Question 6

The physical capital maintenance concept of income would require that an investment in the common stock of another entity be

Accepted Answer

The answer of The physical capital maintenance concept of income...

Question 7

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

Accepted Answer

A loss on impairment of an intangible asset is recognized when the carrying amount of the asset exceeds its fair value. The carrying amount is the book value of the asset on the balance sheet, while the fair value is the amount the asset could be sold for in an arm's length transaction. The expected future net cash flows may be taken into consideration when determining the fair value of the asset, but it is not the difference that determines whether a loss on impairment should be recognized.

Question 8

When a company reports goodwill in its balance sheet,we know that

Accepted Answer

Goodwill is an intangible asset that arises when a company purchases another company for a price that is greater than the fair value of the net assets acquired. Therefore, if a company reports goodwill in its balance sheet, it means that the goodwill was purchased.

Question 9

When a patent is successfully defended in court,the cost of the lawsuit

Accepted Answer

When a patent is successfully defended in court, the cost of the lawsuit should be added to the cost of the patent and depreciated over the remaining useful life of the patent. This is because the lawsuit is directly related to the acquisition and protection of the patent, and therefore should be capitalized as part of the cost of the patent. However, it cannot be expensed immediately as a period cost since it provides future economic benefits to the company. Adding the cost to the patent and depreciating it over its remaining useful life is a proper treatment according to GAAP (Generally Accepted Accounting Principles).

Question 10

A purchased patent has a remaining life of 15 years.It should be

Accepted Answer

The patent should be amortized over its useful life if less than 15 years. This is because the useful life of the patent will determine the period over which the cost of the patent should be allocated as an expense. It would not be appropriate to expense it immediately, as it has a remaining life of 15 years. Similarly, amortizing it over an arbitrary period of 40 years would not accurately reflect the timing of the economic benefits associated with the patent.

Question 11

Should the following fees associated with the registration of an internally developed patent be capitalized? Registration
Legal fees fees

Accepted Answer

Legal fees and registration fees associated with the registration of an internally developed patent should be capitalized as they are directly attributable to the creation of the intangible asset, enhancing its value and extending its useful life.

Question 12

The theoretical justification for expensing research and development R&D)cost as it is incurred is based on which of the following arguments?

Accepted Answer

The theoretical justification for expensing R&D costs as they are incurred is based on the uncertainty of future benefits. This uncertainty means that R&D costs do not meet the strict definition of an asset, which typically requires that future economic benefits are probable.

Question 13

An investor purchased a bond as a long-term investment on January 1.Annual interest was received on December 31.The investor's interest income for the year would be lowest if the bond was purchased at

Accepted Answer

When a bond is purchased at a premium, the investor pays more than the face value of the bond. As a result, the interest income received on an annual basis is lower because it is calculated based on the face value of the bond. Therefore, the lowest interest income for the year would be if the bond was purchased at a premium.

Question 14

Which of the following amounts incurred in connection with a trademark should be capitalized? Cost of a Registration
Successful defense fees

Accepted Answer

Costs incurred in the successful defense of a trademark are capitalized because they extend the asset's useful life and enhance its value. Registration fees are also capitalized as they are directly associated with securing the trademark, which is a valuable intangible asset.

Question 15

The economic concept of income would require that an investment in the common stock of another entity be

Accepted Answer

The economic concept of income would require that investments in the common stock of another entity be reported in the balance sheet at fair value and that unrealized gains and losses be reported in earnings. This is because changes in the fair value of a company's investments reflect economic performance and should be included in the income statement. Unrealized gains and losses can be included in earnings to reflect this economic reality, rather than just reporting realized gains and losses.

Quiz 10: Long-Term Assets Ii: Investments and Intangibles