Day 10 - Impairment / R&D / Bonds

Question 1

What are qualifying R&D costs?

Answer 1

Costs related to:
- Planning
- Design
- Coding
- Testing of software

All costs incurred until “Technological Feasibility” = R&D

MCQ-05414

Question 2

At the inception of a finance lease, the residual value expected to be owed at the end of the lease term should be:

Answer 2

Included as part of Minimum Lease Payments @ PV

MCQ-00403

Question 3

Bond Issue price equals:

Answer 3

The SUM of the:

PV of the Maturity (FV × decimal #)

PLUS

Int. Payment Annuity (FV × bigger #)

MCQ-00652

Question 4

For par value bonds, the Market Rate at issuance will equal:

Answer 4

The Coupon Rate (aka Stated Rate) on the bond

MCQ-01101

Question 5

How is Goodwill Impairment calculated for GAAP?

Answer 5

Impairment Loss = Carrying Amount - Fair Value

Note: Impairment Loss CANNOT EXCEED the amount of Goodwill on the BS

MCQ-10953

Note: GAAP does NOT allow reversal of Impairment Loss

MCQ-13095

Question 6

ABC incurred $6k of organization costs at the beginning of it’s first year of operations. How are the organization costs treated on the FS?

Answer 6

For GAAP, Organization Costs are EXPENSED IMMEDIATELY

MCQ-04672

Question 7

Fundamental Qualitative Characteristics of FS:

Answer 7

“Passing, Confirms, More Money”
Relevance:
1. Predictive Value
2. Confirmatory Value
3. Materiality

“Completely Neutral is Free From Error”
Faithful Representation:
1. Complete
2. Neutral
3. Free From Error

MCQ-14609

Question 8

Enhancing Qualitative Characteristics:

Answer 8

1. Comparability
2. Verifiability
3. Timeliness
4. Understandability

MCQ-14609

Question 9

Software Costs

How are Coding and Testing costs after technological feasibility is established treated?

Answer 9

After Technological Feasibility = Capitalized

Note: Program, Design, Planning, Coding, and Testing costs are *EXPENSED BEFORE Technological Feasibility*

MCQ-11136

Question 10

When purchased Intangible Assets are recorded at:

Answer 10

Recorded at Cost

MCQ-05633

Question 11

Tests for Impairment:

Answer 11

1. Test for Recoverability - Undiscounted (FUTURE) Cash Flows is LESS THAN the Carrying Amount
2. Calculation of the Impairment Loss
   a.) Undiscounted Cash Flows LESS CV = Positive = No Impairment
   b.) Undiscounted Cash Flows LESS CV = Negative = Impairment

MCQ-13094

Question 12

Lessee Decision Tree: “OWNES”

Answer 12

“Yes” to any of the OWNES criteria = Finance Lease

• Ownership
• Written
• Net Present Value
• Economic life
• Specialized

Note: If “OWNES” is met on Lease-Back = a “Failed Sale”

MCQ-00571

Question 13

Can R&D Expenses be capitalized?

Answer 13

Yes, if Equipment, or Facilities have alternate Future Uses, than R&D Costs will be Capitalized over their Useful Life

MCQ-07219