F3 M7 Intangibles

Question 1

Under US GAAP, R&D contracted out to a third party, preproduction prototypes and model costs, and costs for searching for new products or new process alternatives are reported as ____.

Answer 1

Research and development expense

Question 2

Legal fees and other costs associated with registering a patent are (capitalized/expensed) under GAAP.

Answer 2

Capitalized as an intangible asset

Question 3

Research and development costs are (capitalized/expensed) under GAAP.

Answer 3

Expensed

Question 4

Goodwill acquired in an arms-length transaction is (capitalized/expensed).

Answer 4

Capitalized

Question 5

Internally created goodwill is (capitalized/expensed).

Answer 5

Expensed

Question 6

GAAP requires that start-up costs, including organizational costs, be expensed how and when?

Answer 6

As incurred without exception

Question 7

Under ____, the capitalized costs of a patent would include the price of the patent, the VAT taxes, and the legal costs to register the patent.

Answer 7

IFRS

Question 8

Under IFRS, the capitalized costs of a patent would include the ___, ___, and ___.

Answer 8

price of the patent, the VAT taxes, and the legal costs to register the patent.

Question 9

Under IFRS, development costs may be (capitalized/expensed) if certain criteria are met.

Answer 9

Capitalized

Question 10

Which financial statement do revaluation gains go to first and which financial statement do they go to second?

Answer 10

First they go to income statement to reverse a revaluation loss if any then to the other comprehensive income schedule

Question 11

Which financial statement do revaluation losses go to first and which financial statement do they go to second?

Answer 11

First they go to the other comprehensive income schedule to offset a revaluation gain if any then to the income statement

Question 12

Amortization is only recorded for intangible assets with a _____.

Answer 12

Definite life

Question 13

Intangible assets should be amortized over the lesser of the ____ life or the ____ life.

Answer 13

Useful life or the legal life.

Question 14

Development costs of a new product idea are to be (capitalized/expensed).

Answer 14

Expensed

Question 15

Equipment purchased for current projects ONLY must be (capitalized & depreciation/expensed).

Answer 15

Expensed as R&D expenses

Question 16

Equipment purchased for current projects and future projects must be (capitalized & depreciation/expensed).

Answer 16

Capitalized and depreciated

Question 17

Legal costs associated with unsuccessfully defending a patent are (capitalized/expensed).

Answer 17

Immediately expensed

Question 18

A company’s research department incurred $1,000,000 in material, labor, and overhead costs to construct a prototype of a new product and $100,000 to test and modify the prototype. How much cost is capitalized and expensed?

Answer 18

All expensed

Question 19

If equipment is purchased for a project only and the project is expected to take 5 years and the asset could provide benefits for 10 years, what would be the current year expenses?

Answer 19

The total cost of the equipment, it would be capitalized only if the equipment had an alternative use

Question 20

Under GAAP, software developments costs before technological feasibility is established and during the preliminary project stage are (capitalized/expensed).

Answer 20

Expensed

Question 21

Under GAAP, software developments costs after technological feasibility is established and after the preliminary project stage are (capitalized/expensed)

Answer 21

Capitalized

Question 22

Where do these go on the financial statements?

Cost of research and development

Answer 22

Income statement as expense

Question 23

Where do these go on the financial statements?

Cost of patent registrations.

Answer 23

Balance sheet as intangible asset