F3 M7, M8, F4 M1

Question 1

What are classifications of intangibles (types)

Answer 1

Patents, copyrights, granchises, trademarks, and goodwll

Question 2

T or F Intangible assets may be either specifically identifiable or not specifically identifiable

Answer 2

T Specially identifiable = patents, copyrights, franchise; not specially identifiable (goodwill)

Question 3

Under U.S> GAAP the cost of intangible assets NOT AQUIRED FROMOTHERS should be expense when occurred and examples are

Answer 3

Trademarks, goodwill from advertising, cost of developing, maintaining or restoring good will; unsuccessful defense, test for impairment

Question 4

Intangible capitalized cost include what?

Answer 4

Legal fees related to successful defense, registration or consulting fees, design cost, other direct cost to secure an asset

Question 5

T or F; If an intagible asset has an economic life is should be amortized

Answer 5

T

Question 6

T or F; If an intangible asset economic life is indeterminable it should be tested for impairment

Answer 6

T

Question 7

Good will and assets that have indefinite lives should be amortized T or F

Answer 7

F; they receive impairment test only

Question 8

T or F Amortized intangible assets have a finite life

Answer 8

T; a patent is amortized over the shorter of its estimated life or remaining legal life

Question 9

Continuing Franchise Fees are amortized T or F

Answer 9

F they are expensed; only the initial franchise fees the intangible asset is amortized

Question 10

T or F When notes payable is involved with an asset you need to discount the note payable down to the present value

Answer 10

T; when you see a problem where an asset involves a note payable (like an intangible asset, or a piece of equipment traded for a note payable) the payable amount needs to be discounted to the present value and that can be used to determine whether or not the asset has a gain or loss IF THE ASSET IS SOLD

Question 11

Start up costs are expensed an include the following examples

Answer 11

Start up costs are expenses when incurred: organizing a new entity (legal fees etc.), opening a new facility, introducing a new product or service, initiating a new process in an existing facility. TAX RULE: first $5000 spent is tax deductible and can be amortized over 15 years.

Question 12

Start up costs do not include cost associated with

Answer 12

business mergers or acquisitions, ongoing customer acquesistion, routine effors to refine or improve the quality ofexisting producst and services

Question 13

Start up costs do not include cost associated with

Answer 13

business mergers or acquisitions, ongoing customer acquisition, routine efforts to refine or improve the quality of existing products and services

Question 14

Accounting for Research and Development Costs are Expensed T or F

Answer 14

T; except materials, equipment, or facilities that have ALTERNATIVE FUTURE USES, capitalize and depreciate assets over their useful lives; Inventory contractual arrangment

Question 15

What items are not considered research and development

Answer 15

Quality control testing, marketing research, reformulation of a chemical compound, routine periodic design changes to old projects

Question 16

Software that are to be sold, leased, or licensed development costs are capitalized when?

Answer 16

After technological feasibility is established

Question 17

Software to be used internally has similar rules to software sold externally in that cost are capitalized when?

Answer 17

After technological feasibility is established; capitalized using straight line method

Question 18

Legal fees to obtain a patent are R&D and are capitalized T or F

Answer 18

F; legal fees for a patent (intangible asset) are start up costs and expensed

Question 19

Impairment of Intangible assets other than goodwill are tested for impairment how often?

Answer 19

annually

Question 20

When testing property, plant and equipment or intangible asset with a finite life what are your methods

Answer 20

Determine the impairment using undiscounted future cash flows, determine the amount of impairment using fair value/discounted cash flows

Question 21

Intangible asset with a FINITES life is tested for impairment using what two step impairment test?

Answer 21

(1) Recoverability test (carrying amount compared with sum of undiscounted NET cash flows) if your cash flows exceed the carry amount then you will recover (2)If failed, meaning, if you are not going to recover and the carrying amount exceed the undiscounted future cash flows then you go to step two would use FAIR VALUE or discounted cash flows

Question 22

How is the impairment life for an intangible asset tested with an INDEFINITE life? ONE STEP IMPAIRMENT TEST

Answer 22

An indefinite life (such as goodwill) is tested by comparing fair value to carrying amount or discounted cash flows

Question 23

Impairment loss formula

Answer 23

Future cash flows - Net Carrying Value; if answer is greater than 0 then no impairment loss

Question 24

Held to maturity is accounted for using Fair value T or F

Answer 24

F; if you see held to maturit that means it should be accounted for using cost (amortized cost)

Question 25

Debt securities are reported for at cost T or F

Answer 25

F; debt securities (Available for Sale, Trading for Sale)