IA 1 - Intangible (CHAP 33)

Question 1

Which condition must be met for an item to be recognized intangible asset other than goodwill?

a. The fair value can be measured reliably.

b. The item is part of an activity aimed at gaining new scientific or technical knowledge.

c. The item is expected to be used in the production.

d. The item is nonmonetary, identifiable and lacks physical substance.

Answer 1

d. The item is nonmonetary, identifiable and lacks physical substance.

Question 2

An intangible asset is identifiable when

a. It is separable.

b. It arises from contractual and other legal right.

c. It is either separable or it arises from contractual and other legal right.

d. It is neither separable nor it arises from contractual and other legal right.

Answer 2

c. It is either separable or it arises from contractual and other legal right.

Question 3

The recognition criteria for an intangible asset include which of the following conditions?

a. The intangible asset must be measured at cost.

b. The cost can be measured reliably.

c. It is probable that future economic benefit will arise from use.

d. It is probable that future economic benefit will arise from use and the cost can be measured reliably.

Answer 3

d. It is probable that future economic benefit will arise from use and the cost can be measured reliably.

Question 4

After initial recognition, an intangible asset shall be measured using

a. Cost model
b. Revaluation model
c. Cost model or revaluation model
d. Cost model or fair value model

Answer 4

c. Cost model or revaluation model

Question 5

An entity may use the revaluation model for an intangible asset only when

a. The useful life of the intangible asset can be reliably determined.

b. An active market exists for the intangible asset.

c. The cost of the intangible asset can be measured reliably.

d. The intangible asset is a monetary asset.

Answer 5

b. An active market exists for the intangible asset.

Question 6

Which would not qualify as an intangible asset?

a. Computer software
b. Registered patent
c. Copyright
d. Notebook computer

Answer 6

d. Notebook computer

Question 7

Which of the following would qualify as an intangible asset?

a. Advertising and promotion

b. Tuition fees of an employee for an M.B.A program

c. Operating loss during the initial stages of the project

d. Legal costs paid to lawyers to register a patent

Answer 7

d. Legal costs paid to lawyers to register a patent

Question 8

Which is not a consideration in determining the useful life of an intangible asset?

a. Legal, regulatory or contractual provision
b. Provision for renewal or extension
c. Amortization method
d. Obsolescence

Answer 8

c. Amortization method

Question 9

Amortization of an intangible asset with a finite useful life shall commence when

a. It is first recognized as an asset.

b. It is probable that it will generate future benefits.

c. It is available for the intended use.

d. The cost can be identified with reasonable certainty.

Answer 9

c. It is available for the intended use.

Question 10

Which disclosure is not required for an intangible asset?

a. Useful life of the intangible asset

b. Reconciliation of carrying amount at beginning and end

c. Contractual commitment for the acquisition of intangbile asset

d. Fair value of similar intangible asset used by the competitor

Answer 10

d. Fair value of similar intangible asset used by the competitor

Question 11

Intangible assets are reported

a. With an accumulated amortization account

b. Under property, plant and equipment

c. As a separate line item

d. All of these are allowed

Answer 11

c. As a separate line item

Question 12

Intangible assets are classified as

a. Amortizable and unamortizable

b. Limited life and indefinite life

c. Specifically identifiable and goodwill type

d. Legally restricted and goodwill type

Answer 12

b. Limited life and indefinite life

Question 13

Intangible assets with indefinite useful life are tested for impairment

a. Quarterly at the quarterly reporting date

b. Annually at the annual reporting date

c. Biannually at the reporting date

d. There is no definite guideline for impairment

Answer 13

b. Annually at the annual reporting date

Question 14

The major problem for an intangible asset is determining

a. Fair value
b. Separability
c. Residual value
d. Useful life

Answer 14

d. Useful life

Question 15

One factor that is not considered in determining the useful life of an intangible asset is

a. Residual value
b. Provision for renewal or extension
c. Legal life
d. Expected action of competitors

Answer 15

a. Residual value

Question 16

What is the method of amortizing intangible asset?

a. Straight line method, unless the pattern of the economic benefits can be determined reliably

b. Double declining balance in all circumstances

c. A subjective amount of periodic amortization

d. Straight line method in all circumstances

Answer 16

a. Straight line method, unless the pattern of the economic benefits can be determined reliably

Question 17

The cost of an internally generated asset includes all of the following, except

a. Cost of materials used.

b. Compensation costs of personnel directly engaged.

c. Fees to register a legal right.

d. Expenditure on training staff to operate the asset.

Answer 17

d. Expenditure on training staff to operate the asset.

Question 18

Operating loss incurred during the start-up years of a new entity should be

a. Accounted for like any other operating loss

b. Written off directly against retained earnings.

c. Capitalized and amortized over five years.

d. Capitalized as an intangible asset and amortized over twenty years.

Answer 18

a. Accounted for like any other operating loss

Question 19

Goodwill shall be recognized only when

a. It is purchased from another entity.

b. It can be established that a definite benefit has resulted from good name, capable staff or reputation.

c. It is acquired through the purchase of another entity.

d. An entity reports above normal earnings.

Answer 19

c. It is acquired through the purchase of another entity.

Question 20

Goodwill shall be tested for impairment

a. If there is an indication of impairment
b. Annually
c. Every five years
d. On the acquisition of a subsidiary

Answer 20

b. Annually