CH12 [Auditing Long-Lived Assets and Merger and Acquisition Activity]

Question 1

A process of expensing the acquisition cost minus the residual value of intangible assets over their estimated useful economic life.

Answer 1

Amortization expense

Question 2

A term used to describe management’s recognition that a significant portion of fixed assets is no longer as productive as had originally been expected. When assets are so impaired, the assets should be written down to their expected economic value.

Answer 2

Asset impairment

Question 3

Expense associated with the extraction of natural resources.

Answer 3

Depletion expense

Question 4

A human behavior pattern in which an individual or group—when faced with increasingly negative outcomes from some decision, action, or investment—continues the same behavior rather than alter course.

Answer 4

Escalation of commitment

Question 5

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Answer 5

Fair value estimate

Question 6

The excess of the purchase price over the fair market values of the acquired organization’s tangible assets, identifiable intangible assets, and liabilities.

Answer 6

Goodwill

Question 7

The excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit).

Answer 7

Goodwill impairment loss

Question 8

Nonphysical assets, such as patents, trademarks, copyrights, and brand recognition.

Answer 8

Intangible Assets

Question 9

Noncurrent assets that organizations use over multiple operating cycles and include tangible assets of land, buildings, fixtures, and equipment. ____________ also include intangible assets.

Answer 9

Long-lived assets

Question 10

Assets that have a physical form, such as machinery, buildings, and land.

Answer 10

Tangible assets