303 Final- CH. 11

Question 1

Intangible assets are normally classified as current assets

Answer 1

False: intangible assets usually provide service for a number of years (LT asset)

Question 2

Which of the following is NOT a characteristic of intangible assets?

Answer 2

They are all subject to amortization

Question 3

Which of the following is a factor to be considered in determining a limited-life intangible asset’s useful life?

Answer 3

Any legal provisions that may limit the useful life
the expected useful life of another asset or group of assets to which the useful life of the intangible asset may relate
the effects of obsolescence

Question 4

A purchased limited-life intangible asset _____ amortized and is impairment tested using __________.

Answer 4

is; the recoverability test and then the fair value test

Question 5

T/F: Impairment testing is performed in the same way for indefinite-life intangibles and limited-life intangibles.

Answer 5

False: Indefinite-life intangibles are ONLY fair value tested

Question 6

Which of the following statements concerning intangible assets is correct?

Answer 6

Intangible assets derive their value from the rights and privileges granted to the company using them.

Question 7

T/F: If a company buys several intangible assets in a “basket purchase,” the company should allocate the cost on the basis of the book values of the purchased intangible assets.

Answer 7

False: allocate the cost on the basis of fair values

Question 8

T/F: If the life of a limited-life intangible asset changes, the remaining carrying amount is amortized over the revised remaining useful life.

Answer 8

True

Question 9

T/F: The residual value of an intangible asset should be assumed to be zero unless, at the end of its useful life, the intangible asset has value to another company

Answer 9

True

Question 10

Construction permits are

Answer 10

contract-related intangible assets

Question 11

Which of the following is NOT one of the major categories of intangibles?

Answer 11

financing related

Question 12

Marketing-related intangibles would include

Answer 12

a trade name

Question 13

The two principal types of patents are

Answer 13

process patents and product patents

Question 14

Production backlogs fall under which category of intangible assets?

Answer 14

Customer-related

Question 15

Which of the following represents a federally granted right?

Answer 15

Copyrights

Question 16

Which of the following would not be amortized?

Answer 16

Trade name.

Question 17

Which of the following is NOT an example of a contract-related intangible asset?

Answer 17

Copyright - artistic related

Question 18

The excess cost of the purchase over the fair market value of a company’s identifiable net assets is sometimes referred to as

Answer 18

Goodwill, master valuation account, gap filler

Question 19

Report the excess fair value over purchase price as a

Answer 19

gain

Question 20

The impairment rule for goodwill involves

Answer 20

1 step - fair value test

Question 21

Capitalizing goodwill only when it is purchased in an arm’s-length transaction, and not capitalizing any goodwill generated internally, is an example of

Answer 21

faithful representation winning out over relevance

Question 22

T/F: There are two steps to impairment testing for goodwill: first the recoverability test is performed, then the fair value test is performed.

Answer 22

False: Impairment rule for goodwill is a single-step process. A company compares the fair value of the reporting unit to its carrying amount including goodwill.

Question 23

The controversy surrounding the policy to expense all research and development costs associated with internally created intangible assets results in

Answer 23

understating assets and overstating expenses

Question 24

Which of the following principles best describes the current method of accounting for research and development costs?

Answer 24

immediate recognition as an expense

Question 25

Which of the following research and development costs may be capitalized?

Answer 25

R&D equipment with alternative future uses in other R&D projects or otherwise

Question 26

The presentation of intangible assets in the financial statements

Answer 26

includes reporting R&D costs as an expense in the income statement, the disclosure of the amortization expense, and involves crediting amortization directly to the intangible asset account

Question 27

Which of the following is considered a research activity?

Answer 27

Critical investigation aimed at discovery of new knowledge

Question 28

Which of the following costs should be excluded from research and development expense?

Answer 28

cost of marketing research for a new product

Question 29

T/F: On the Income Statement, a company reports impairment losses related to intangible assets as an extraordinary item due to their infrequent occurrence, and amortization expense as part of a continuing operations

Answer 29

False: Impairment losses related to intangible assets and amortization expense are both reported as part of income from continuing operations