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ACCTG 433 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

intangible assets derive their value from the right to receive cash in the future?

A

FALSE

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2
Q

Internally generated intangible assets are initially recorded at fair value

A

false

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3
Q

direct costs can be capitalized

A

true

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4
Q

most direct costs are generated through

A

research and development

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5
Q

research and development costs are

A

expenses

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6
Q

limited-life intangibles are amortized by systematic charges to expense over their useful life (amortized)

A

true

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7
Q

some intangible assets are not required to be amortized

A

true

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8
Q

indefinite assets are amortized

A

true

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9
Q

intangible or expense: research costs to internally develop a customer list over a 3-year period

A

expense

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10
Q

intangible or expense: purchase of patent with an expected useful life of 10 years

A

intangible - finite

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11
Q

intangible or expense: purchase of copyright, allowing certain printing rights for 50 years

A

intangible - finite

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12
Q

intangible or expense or goodwill: purchase of a company for 50,000 over the fair value of its identifiable net asset

A

goodwill - indefinite

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13
Q

intangible or expense: customer list purchased from a research institution with a benefit period estimated to be 5 years

A

intangible - finite

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14
Q

intangible or expense: purchase of a trademark, expected to be renewed indefinitely

A

intangible - indefinite

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15
Q

intangible or expense: legal costs incurred for an outside counsel to register a patent, which was internally developed

A

intangible - finite

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16
Q

intangible or expense: legal costs incurred fo ran outside counsel to successfully defend a patent internally developed

A

intangible - finite

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17
Q

intangible or expense: legal costs incurred for an outside counsel to successfully defend a patent internally developed

A

intangible finite

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18
Q

research and development costs incurred by the company’s technology division to develop a patent

A

expense

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19
Q

if a company develops a trademark, it should expense the costs related to attorney fees, registration fees, and design costs

A

false

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20
Q

if a company develops a trademark, it should capitalize the costs related to attorney fees, registration fees, and design costs

A

true

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21
Q

the cost of acquiring a customer list from another company is recorded as an intangible asset

A

true

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22
Q

the cost of a purchased patent should be amortized over the remaining legal life of the patent

A

false

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23
Q

the cost of a purchased patent should be amortized over the legal life or useful life, whichever is shorter

A

true

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24
Q

if the 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

A

true

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25
Q

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible net assets, with the remainder recorded as goodwill.

A

true

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26
Q

Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.

A

false

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27
Q

Goodwill is considered a master valuation account because it measures the value of unidentifiable intangible assets

A

true

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28
Q

Internally generated goodwill should not be capitalized in the accounts.

A

true

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29
Q

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

A

false

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30
Q

Internally generated goodwill associated with a business may be recorded as an asset when a firm actually purchases a business unit

A

true

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31
Q

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs

A

true

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32
Q

If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized

A

true

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33
Q

After an impairment loss is recorded for a limited-life intangible asset, the carrying amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

A

true

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34
Q

The rules used to account for impairments of limited-life intangible assets are different from the rules used to account for impairments of plant and equipment.

A

false

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35
Q

The rules used to account for impairments of limited-life intangible assets are the same two-step test that is used to account for impairments of plant and equipment.

A

true

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36
Q

If fair value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.

A

false

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37
Q

If the fair value of an impaired asset recovers after impairment has been recognized, the impairment can never be reversed

A

true

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38
Q

The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

A

false

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39
Q

Contra accounts must be reported for intangible assets in a manner similar to accumulated depreciation and property, plant, and equipment.

A

false

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40
Q

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

A

false

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41
Q

Research and development costs that result in patents need to be expensed

A

true

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42
Q

Research and development costs are reported as intangible assets if they will provide economic benefits in future years

A

false

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43
Q

GAAP requires start-up costs and initial operating losses during the early years to be capitalized.

A

false

44
Q

GAAP requires start-up costs and initial operating losses are always expensed.

A

true

45
Q

Material, labor, and overhead costs incurred in developing a new product are to be
expensed as these are development costs.

A

true

46
Q

Periodic alterations to existing products are an example of research and development costs.

A

false

47
Q

R&D expense, non-R&D expense, or asset? Routine quality reviews to improve upon the qualities of an existing product.

A

non-R&D expense

48
Q

R&D expense, non-R&D expense, or asset? Engineering activity required to advance the design of a product to the point that it meets specific functional requirements necessary to be ready to manufacture

A

R&D expense

49
Q

R&D expense, non-R&D expense, or asset? Costs to adapt a product requirement to meet a current customer’s specific need

A

non-R&D expense

50
Q

R&D expense, non-R&D expense, or asset? Testing of a product prototype

A

R&D expense

51
Q

R&D expense, non-R&D expense, or asset? Seasonal design change to an existing product

A

non-R&D expense

52
Q

R&D expense, non-R&D expense, or asset? Purchase of a facility with alternative possible uses to be used to perform ongoingresearch activities

A

asset

53
Q

R&D expense, non-R&D expense, or asset? Salaries and related expenses of employees developing a design that represents a
significant improvement to a current product

A

R&D expense

54
Q

A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized

A

false

55
Q

Dividends in arrears on cumulative preferred stock should be recorded as a current liability

A

false

56
Q

Dividends in arrears on cumulative preferred stock should be recorded as a legal liability is the board determines

A

true

57
Q

Magazine subscriptions and airline ticket sales both result in unearned revenues.

A

true

58
Q

Discount on Notes Payable is a contra account to Notes Payable on the balance sheet

A

true

59
Q

All long-term debt maturing within the next year must be classified as a current liability on the balance sheet.

A

false

60
Q

Many companies do not segregate the sales tax collected and the amount of the sale at the time of the sale.

A

true

61
Q

A company must accrue a liability for sick pay that accumulates but does not vest.

A

false

62
Q

Companies report the amount of social security taxes withheld from employees as well as the companies’ matching portion as current liabilities until they are remitted

A

true

63
Q

Accumulated rights exist when an employer has an obligation to make payment to an employee even after terminating his employment

A

false

64
Q

vesting exists when an employer has an obligation to make payment to an employee even after terminating his employment

A

true

65
Q

Companies should recognize the expense and related liability for compensated absences in the year earned by employees.

A

true

66
Q

An employee has the right to receive compensation for future paid leave, and the payment of compensation is probable. If the obligation relates to rights that vest but the amount cannot be reasonably estimated, the employer should:

A

not accrue a liability; however, disclosure is required

67
Q

The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability.

A

true

68
Q

The cause for litigation must have occurred on or before the date of the financial statements to report a liability in the financial statements.

A

false

69
Q

Current liabilities are usually recorded and reported in financial statements at their full maturity value.

A

true

70
Q

A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis and demonstrates the ability to consummate the refinancing

A

true

71
Q

Under an assurance-type warranty, companies charge warranty costs only to the period in which they comply with the warranty.

A

false

72
Q

Under an service type warranty, companies charge warranty costs only to the period in which they comply with the warranty.

A

true

73
Q

Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is reasonably possible that a liability has been incurred.

A

false

74
Q

A company discloses gain contingencies in the notes only when a high probability exists for realizing them.

A

true

75
Q

The revenue from a service-type warranty that covers several years should all be recognized in the period the warranty is sold.

A

false

76
Q

The revenue from a assurance-type warranty that covers several years should all be recognized in the period the warranty is sold.

A

true

77
Q

Companies usually make bond interest payments semiannually, although the interest rate is generally expressed as an annual rate.

A

true

78
Q

A mortgage bond is referred to as a debenture bond.

A

false

79
Q

Bond issues that mature in installments are called serial bonds

A

true

80
Q

If the market rate is greater than the coupon rate, bonds will be sold at a premium.

A

false

81
Q

If the market rate is greater than the coupon rate, bonds will be sold at a discount

A

true

82
Q

The interest rate written in the terms of the bond indenture is called the effective yield or market rate

A

false

83
Q

The stated rate is the same as the coupon or nominal rate.

A

true

84
Q

Amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense.

A

false

85
Q

A bond may only be issued on a payment interest date

A

false

86
Q

The cash paid for interest will always be greater than interest expense when using effective-interest amortization for a bond.

A

false

87
Q

Companies report bond discounts as a deduction from the face amount of the bond.

A

true

88
Q

term bonds

A

A bond that matures on a single date

89
Q

mortgage bond

A

A loan secured by real estate

90
Q

debenture bond

A

A bond that is unsecured

91
Q

income bond

A

A bond that pays no interest unless the company is profitable

92
Q

callable bond

A

A bond that may be called and retired by the issuer prior to maturity

93
Q

registered bond

A

A bond that is issued in the name of the owner

94
Q

a bearer or coupon bond

A

A bond which is not recorded in the name of the owner and may be transferred to another owner by mere delivery

95
Q

convertible bond

A

A bond that pays no interest unless the company is profitable

96
Q

commodity-backed bond

A

A bond that may be redeemed in terms of a commodity

97
Q

deep discount bond

A

Also called a zero-interest bond

98
Q

issuance costs are put on the books as an

A

asset

99
Q

issuance costs are amortized

A

over the life of the note/bond

100
Q

If a long-term note payable has a stated interest rate, that rate should be considered to be the effective rate

A

false

101
Q

If companies choose the fair value option for measuring bonds and long-term notes, the unrealized holding gains or losses are reported as part of net income.

A

true

102
Q

Off-balance-sheet financing is an attempt to borrow monies in such a way to minimize the reporting of debt on the balance sheet.

A

true

103
Q

The debt to assets ratio will go up if an equal amount of assets and liabilities are added to the balance sheet.

A

true

104
Q

If a company plans to retire long-term debt from a bond retirement fund, it should report the debt as current.

A

false

105
Q

The two ratios that provide information about debt-paying ability and long-run solvency are the debt-to-assets ratio and the times interest earned ratio.

A

true

106
Q

The bond is classified as current only if the current assets are use to pay them

A

true

ACCTG 433 (1 decks)

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