Chapter 12: Intangible Assets and Goodwill Flashcards
Which of the following is not an intangible asset?
A
accounts receivable.
B
franchises.
C
patents.
D
copyrights.
A
A company plans to amortize an intangible asset. When they journalize the amortization amount, they should debit an expense account and credit
A
either the intangible asset account or an associated accumulated amortization account.
B
the intangible asset account but not the accumulated amortization account.
C
the accumulated amortization account but not the intangible asset account.
D
both the intangible asset account and an associated accumulated amortization account.
C
For amortization purposes, companies should characterize their intangible assets as either
A
limited-life or indefinite-life.
B
amortizable or unamortizable.
C
specifically identifiable or goodwill-type.
D
legally restricted or goodwill-type.
A
Which of the following is not considered when determining the useful life of an intangible asset?
A
Residual value, except when it is of value to another company
B
Expected actions of competitors
C
Legal life
D
Provisions for renewal or extension
A
Jamison Enterprises acquired a franchise to operate a Good Burger Joint in January, 2016. The cost of the franchise was $360,000 and was estimated to have a limited life of 30 years. Early in the year 2021, the franchise was forced out of business due to lawsuits. Jamison should record which of the following series of expenses to their income statement for the years noted?
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Table:
I. II. III. IV.
2016 2017 2021
1. 10000. 10000. 10000
2. 12000. 12000. 12000
3. 12000. 12000. 300000
4. 0. 0. 360000
A
3.
B
2.
C
1.
D
4.
A
Costs associated with developing a trademark or trade name should not be capitalized if they result from
A
research.
B
consulting fees.
C
attorney fees.
D
design costs.
A
If a company develops and registers a trademark in-house, how should it handle the accounting for the fees associated with registering the trademark?
A
Costs should be capitalized and amortized over the trademark’s useful life.
B
Costs should be capitalized and amortized over 10 years regardless of the trademark’s useful life.
C
Costs should be expensed as incurred.
D
Costs should be charged to an asset account that should not be amortized.
A
On January 3, 2009, Hamm Enterprises was granted a patent on a product. On January 8, 2021, to protect its patent, Hamm purchased a patent on a competing product that originally was issued on January 15, 2013. Because of its unique plant, Hamm does not feel that the competing patent can be used in producing a product. The cost of acquiring the competing patent should be
A
amortized over a maximum period of 12 years.
B
amortized over a maximum period of 14 years.
C
amortized over a maximum period of 20 years.
D
expensed in 2021.
A
Which of the following is true about goodwill?
A
Goodwill represents a unique asset in that its value can be identified only with the business as a whole.
B
Goodwill is easily computed by assigning a value to the individual attributes that comprise its existence.
C
Goodwill generated internally should not be capitalized unless it is measured by an individual independent of the enterprise involved.
D
Goodwill exists in any company that has earnings that differ from those of a competitor.
A
Which of the following statements is true about the amortization of goodwill?
A
It does not happen as it is deemed to have an indefinite life.
B
It is dependent upon the number of years a company expects to use the benefits it provides.
C
It represents an acceptable accounting practice as does the immediate write-off method.
D
It should be computed using the straight-line method unless another method is deemed more appropriate.
A
Why does the accounting profession not allow the immediate write-off of goodwill?
A
To write-off goodwill immediately would lead to the incorrect conclusion that goodwill has no future service potential.
B
Goodwill has a useful life like all assets and should be charged as an expense at a normal rate.
C
The immediate write-off would cause net income to be much lower than it had been for the company in recent years and comparability would be distorted.
D
Because the amortization of goodwill is tax deductible, an immediate write-off serves no useful purpose.
A
Burris Enterprises is testing their limited-life intangible assets for impairment. The company follows IFRS. The impairment test(s) they should use include(s)
A
both the recoverability test and the fair value test.
B
the recoverability test but not the fair value test.
C
the fair value test but not the recoverability test.
D
neither the recoverability test nor the fair value test.
C
Dickinson Outerwear is calculating impairment of their indefinite-life intangibles other than goodwill. The company follows ASPE. The impairment test(s) they should use include(s)
A
the fair value test but not the recoverability test.
B
the recoverability test but not the fair value test.
C
both the recoverability test and the fair value test.
D
neither the recoverability test nor the fair value test.
A
In 2017, Herron Resources purchased Stinson Tile for $4.5 million. On December 31, 2020, the Stinson division reported net assets of $5,600,000 (including $1,800,000 of goodwill). Herron reviewed the Stinson division and determined that expected net future cash flows equalled $4,700,000 and the fair value is estimated to be only $3,900,000. What entry should Herron record concerning the Stinson division on December 31, 2020?
This is correct answer :
A
DR: loss on impairment 1700000
CR:Acc. Impairment losses[goodwill] 1700000
B
No entry is needed.
C
DR: loss on impairment 900000
CR:Acc. Impairment losses[goodwill] 900000
D
DR: loss on impairment 1700000
CR: Pro-rata deduction of all assets 1700000
A
Research and development costs that have no future use
A
must be expensed in the period incurred unless contractually reimbursable.
B
must be capitalized when incurred and then amortized over their estimated useful lives.
C
may be either capitalized or expensed when incurred.
D
must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will result in the discovery of a profitable product.
A
