Intangibles

Question 1

Which intangible asset is subject to recoverability test when tested for impairment?

Answer 1

PATENT - The recoverability test is applied to definite life intangible test. Impairment loss = CV-FV

Question 2

Patent is to amortized over what period?

Answer 2

Patent should be amortized over shorter of useful or legal life). Patent is generally granted for 20 years and has definite life.

Question 3

What are trademarks?

Answer 3

Trademarks provide legal protection for the exclusive use of an identifying word, phrase, symbol or design. It must be renewed every 10 years. It may have an indefinite life if there are no legal or economic factors. Since TRADEMARK is RENEWABLE - it has INDEFINITE LIFE

Question 4

Private company alternative has an amortization period of how many years for GOODWILL?

Answer 4

10 Years

Question 5

True or False: Attorney fees (legal and filing cost) will be added to the cost of the Patent

Answer 5

True

Question 6

At what price is patent recorded?

Answer 6

At Fair Value or Market value

Question 7

Amount spent on developing a new idea for a product that was patented last year is ___________

Answer 7

R&D expense

Question 8

A disadvantage of the periodic inventory system is that the COGS amount used for financial reporting purposes includes both the cost of inventory sold and inventory shortages.

Answer 8

True

Question 9

PERPETUAL

Answer 9

Continuously update inventory
Know inventory amount at any point in time

Question 10

PERIODIC

Answer 10

(1) No adjustment to inventory until the end of the period
(2) Must estimate inventory during the year

Question 11

Capitalize Purchase price (acquired patents, Legal costs associated with obtaining a patent on a new product). Filing Fees.

Question 12

R&D - Research and development (internally developed patents, unsuccessful defense of patent)

Question 13

HTM - Impairment (rule of Conservatism).

Ques - A CO. HAS A $100,000 HTM with an unamortized premium of $2,775 and an allowance for credit loss of $1,500. The net amount reported on the balance sheet would be the _________

JE for impairment

Answer 13

CECL - Current Expected CREDIT LOSS model (IS): If sum of the PV of Future Cash flows is less than the AMORTIZED COST

Ans - FV 100000+Premium 2,775 = CV 102,775
CV - Allowance for credit loss = 102,775 -1500
BS = $101,275

JE
Credit loss expense (IS) XXX
Investment in HTM securities - allowance for credit losses XXX

Question 14

Cost of developing the patent is not recorded as cost of the patent. It’s irrelevant for financial reporting purpose.

Answer 14

Only Cost of the patent is amortized.

Question 15

Equipment - if it has alternative uses then make JE as research and development expense to record instead of taking it as dep expense

Answer 15

True

Question 16

Intangible asset is impaired if

Answer 16

Sum of undiscounted FCF < CVA

Impairment loss = FV <CVA
Impairment loss = FV-CV

Question 17

Copyright

Answer 17

Life of the creator plus 70 yrs; amortized over useful life. Protection of artistic works, including books, recordings and computer software.

Question 18

Software - without customization

Answer 18

Capitalize and amortize

Question 19

Software - with customization

Answer 19

Costs to modify expense as incurred - Before Point of Technological feasibility (expense)

After point of Technological feasibility - Amortize

Question 20

Service contracts get ________

Answer 20

expensed in the period benefited