ACC 304 Week 11 Final Exam – Strayer NEW
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Week 11 Final Exam: Chapter 12 Through 16
INTANGIBLE ASSETS
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. Intangible
assets derive their value from the right (claim) to receive cash in the future.
2. Internally
created intangibles are recorded at cost.
3. Internally
generated intangible assets are initially recorded at fair value.
4. Amortization
of limited-life intangible assets should not be impacted by expected residual
values.
5. Some
intangible assets are not required to be amortized every year.
6. Limited-life
intangibles are amortized by systematic charges to expense over their useful
life.
7. The
cost of acquiring a customer list from another company is recorded as an
intangible asset.
8. The
cost of purchased patents should be amortized over the remaining legal life of
the patent.
9. 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.
10. In
a business combination, a company assigns the cost, where possible, to the
identifiable tangible and intangible assets, with the remainder recorded as
goodwill.
11. Internally
generated goodwill should not be capitalized in the accounts.
12. 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.
13. All
intangibles are subject to periodic consideration of impairment with
corresponding potential write-downs.
14. If the
fair value of an unlimited life intangible other than goodwill is less than its
book value, an impairment loss must be recognized.
15. If
market value of an impaired asset recovers after an impairment has been
recognized, the impairment may be reversed in a subsequent period.
16. The
same recoverability test that is used for impairments of property, plant, and
equipment is used for impairments of indefinite-life intangibles.
17. Periodic
alterations to existing products are an example of research and development
costs.
18. Research
and development costs that result in patents may be capitalized to the extent
of the fair value of the patent.
19. Research
and development costs are recorded as an intangible asset if it is felt they
will provide economic benefits in future years.
20. Contra
accounts must be reported for intangible assets in a manner similar to
accumu-lated depreciation and property, plant, and equipment.
True False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21. Which of the following does
not describe intangible assets?
a. They lack physical existence.
b. They are financial instruments.
c. They provide long-term benefits.
d. They are classified as long-term assets.
22. 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.
23. Which characteristic is not possessed by intangible assets?
a. Physical existence.
b. Short-lived.
c. Result in future benefits.
d. Expensed over current and/or future years.
24. 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.
25. Which
of the following costs incurred internally to create an intangible asset is
generally expensed?
a. Research and development costs.
b. Filing costs.
c. Legal costs.
d. All of the above.
26. 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
27. 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.
28. 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.
29. 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.
30. Companies
should test indefinite life intangible assets at least annually for:
a. recoverability.
b. amortization.
c. impairment.
d. estimated useful life.
S31. One
factor that is not considered in determining the useful life of an intangible
asset is
a.
salvage value.
b.
provisions for renewal or extension.
c.
legal life.
d.
expected actions of competitors.
32. Which intangible assets are amortized?
Limited-Life Indefinite-Life
a. Yes Yes
b. Yes No
c. No Yes
d. No No
33. 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.
34. Broadway Corporation was granted a patent on a product on
January 1, 2001. To protect its patent, the corporation purchased on January 1,
2012 a patent on a competing product which was originally issued on January 10,
2008. 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 2012.
35. 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.
36. Which of the following is not
an intangible asset?
a. Trade name
b. Research and development costs
c. Franchise
d. Copyrights
37. 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.
38. When a patent is amortized, the credit is usually made to
a. the Patent account.
b. an Accumulated Amortization account.
c. a Deferred Credit account.
d. an expense account.
39. 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.
40. In
a business combination, companies record identifiable intangible assets that
they can reliably measure. All other intangible assets, too difficult to
identify or measure, are recorded as:
a. other assets.
b. indirect costs.
c. goodwill.
d. direct costs.
41. 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.
42. 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 brand name.
b. A patent.
c. A customer list.
d. All of the above.
43. 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. Brand Name.
44. 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 tangible and identifiable intangible 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.
45. Easton Company and Lofton Company were combined in a purchase
transaction. Easton was able to acquire Lofton at a bargain price. The sum of
the fair values of identifiable assets acquired less the fair value of
liabilities assumed exceeded the cost to Easton. Proper accounting treatment by
Easton is to report the excess amount as
a. a gain.
b. part of current income in the year of
combination.
c. a deferred credit and amortize it.
d. paid-in capital.
46. Purchased goodwill should
a. be written off as soon as possible against
retained earnings.
b. be written off as soon as possible as an
extraordinary item.
c. be written off by systematic charges as a
regular operating expense over the period benefited.
d. not be amortized.
47. 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.
48. 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 fair value.
c. fair value and the expected future net cash
flows.
d. book value and its fair value.
49. The recoverability test is used to determine any impairment loss
on which of the following types of intangible assets?
a. Indefinite life intangibles other than
goodwill.
b. Indefinite life intangibles.
c. Goodwill.
d. Limited life intangibles.
50. Buerhle
Company needs to determine if its indefinite-life intangibles other than
goodwill have been impaired and should be reduced or written off on its balance
sheet. The impairment test(s) to be used is (are)
Recoverability
Test Fair Value Test
a. Yes Yes
b. Yes No
c No Yes
d. No No
51. The
carrying amount of an intangible is
a. the fair value of the asset at a balance
sheet date.
b. the asset's acquisition cost less the total related
amortization recorded to date.
c. equal to the balance of the related
accumulated amortization account.
d. the assessed value of the asset for
intangible tax purposes.
52. 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
53. 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
54. How should research and development costs be accounted for,
according to a Financial Accounting Standards Board 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.
55. 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.
56. 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.
57. 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.
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