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BSA 12C Intermediate Accounting 1 > Topic 8 (Ch. 33-35) > Flashcards

Topic 8 (Ch. 33-35) Flashcards

1
Q
  1. Intangible assets derive their value from the right (claim) to receive cash in the future.
A

F

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2
Q
  1. All research phase and development phase costs are expensed as incurred.
A

F

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3
Q
  1. Research phase costs are capitalized as an intangible asset once the project has economic viability.
A

F

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4
Q
  1. Companies are required to assess the estimated useful life and salvage value of intangible assets at least annually.
A

T

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5
Q
  1. Impairment testing is conducted annually for both limited–life and indefinite-life intangible assets.
A

F

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6
Q
  1. Amortization of limited-life intangible assets should not be impacted by expected residual values.
A

F

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7
Q
  1. Some intangible assets are not required to be amortized every year.
A

T

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8
Q
  1. Limited-life intangibles are amortized by systematic charges to expense over their useful life.
A

T

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9
Q
  1. The cost of acquiring a customer list from another company is recorded as an intangible asset.
A

T

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10
Q
  1. The cost of purchased patents should be amortized over the remaining legal life of the patent.
A

F

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11
Q
  1. If a 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

T

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12
Q
  1. In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.
A

T

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13
Q
  1. Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.
A

F

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14
Q
  1. Internally generated goodwill should not be capitalized in the accounts.
A

T

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15
Q
  1. 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

F

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16
Q
  1. All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.
A

T

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17
Q
  1. If the recoverable amount of an indefinite-life intangible other than goodwill is less than its carrying value, an impairment loss must be recognized.
A

T

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18
Q
  1. A cash-generating unit is the smallest identifiable group of assets in a business that can
    generate cash flow independently of the cash flows from the business’s other assets.
A

T

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19
Q
  1. The impairment test for goodwill is conducted based on the cash-generating unit to which the goodwill has been assigned.
A

T

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20
Q
  1. Recoveries of impairments for intangible long-lived assets are reported in “other income and expense” on the income statement.
A

T

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21
Q
  1. A recovery of impairment for an intangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred.
A

T

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22
Q
  1. After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.
A

T

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23
Q
  1. After an impairment loss is recorded for goodwill, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.
A

F

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24
Q
  1. Accounting for impairments for limited-life intangible assets follows the same rules used to account for impairments of plant and equipment.
A

T

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25
Q
  1. IFRS permits reversals of impairment losses for all limited and indefinite-life intangible assets.
A

F

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26
Q
  1. Periodic alterations to existing products are an example of research and development costs.
A

F

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27
Q
  1. Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.
A

F

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28
Q
  1. IFRS requires that start-up costs and initial operating losses during the early years be capitalized.
A

F

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29
Q
  1. Research and development costs are recorded as an intangible asset if it is felt they will provide economic benefits in future years.
A

F

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30
Q
  1. Contra accounts must be reported for intangible assets in a manner similar to the reporting of property, plant, and equipment.
A

F

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31
Q
  1. Which of the following does not describe intangible assets?

a. They lack physical existence.
b. They are monetary assets.
c. They provide long-term benefits.
d. They are classified as long-term assets.

A

B

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32
Q
  1. Which of the following characteristics do intangible assets possess?
    a. Physical existence.
    b. Claim to a specific amount of cash in the future.
    c. Long-lived.
    d. Held for resale.
A

C.

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33
Q
  1. Which characteristic is not possessed by intangible assets?

a. Physical existence.
b. Identifiable.
c. Result in future benefits.
d. Expensed over current and/or future years.

A

A.

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34
Q
  1. Costs incurred internally to create intangibles are
    a. capitalized.
    b. capitalized if they have an indefinite life.
    c. expensed as incurred.
    d. expensed only if they have a limited life.
A

C.

35
Q
  1. Which of the following costs incurred internally to create an intangible asset is generally expensed?
    a. Research phase costs.
    b. Filing costs.
    c. Legal costs.
    d. All of these choices are correct.
A

A

36
Q
  1. The major problem of accounting for intangibles is determining
    a. fair value.
    b. separability.
    c. salvage value.
    d. useful life.
A

D

37
Q
  1. Copyrights should be amortized over
    a. their legal life.
    b. the life of the creator plus fifty years.
    c. twenty years.
    d. their useful life or legal life, whichever is shorter.
A

D.

38
Q
  1. A patent should be amortized over

a. twenty years.
b. its useful life.
c. its useful life or twenty years, whichever is longer.
d. its useful life or twenty years, whichever is shorter.

A

D

39
Q
  1. Limited-life intangibles are reported at their

a. replacement cost.
b. carrying amount unless impaired.
c. acquisition cost.
d. liquidation value.

A

B

40
Q
  1. Which of the following methods of amortization is normally used for intangible assets?

a. Sum-of-the-years’-digits
b. Straight-line
c. Units of production
d. Double-declining-balance

A

B.

41
Q
  1. The cost of an intangible asset includes all of the following except

a. purchase price.
b. legal fees.
c. other incidental expenses.
d. all of these are included.

A

D.

42
Q
  1. Factors considered in determining an intangible asset’s useful life include all of the following except

a. the expected use of the asset.
b. any legal or contractual provisions that may limit the useful life.
c. any provisions for renewal or extension of the asset’s legal life.
d. the amortization method used.

A

D

43
Q
  1. Under current accounting practice, intangible assets are classified as

a. amortizable or unamortizable.
b. limited-life or indefinite-life.
c. specifically identifiable or goodwill-type.
d. legally restricted or goodwill-type.

A

B

44
Q
  1. Companies should evaluate indefinite life intangible assets at least annually for:

a. recoverability.
b. amortization.
c. impairment.
d. estimated useful life.

A

C.

45
Q
  1. One factor that is not considered in determining the useful life of an intangible asset is

a. salvage value.
b. provisions for renewal or extension.
c. legal life.
d. expected actions of competitors.

A

A.

46
Q
  1. Which intangible assets are amortized?

Limited-Life Indefinite-Life

a. Yes Yes
b. Yes No
c. No Yes
d.No No

A

B.

47
Q
  1. The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser’s patented products should be

a. charged off in the current period.
b. amortized over the legal life of the purchased patent.
c. added to factory overhead and allocated to production of the purchaser’s product.
d. amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented
product.

A

D

48
Q
  1. Broadway Corporation was granted a patent on a product on January 1, 2004. To protect its patent, the corporation purchased on January 1, 2015 a patent on a competing product which was originally issued on January 10, 2011. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be

a. amortized over a maximum period of 20 years.
b. amortized over a maximum period of 16 years.
c. amortized over a maximum period of 9 years.
d. expensed in 2015.

A

C

49
Q
  1. Wriglee, Inc. went to court this year and successfully defended its patent from infringe- ment by a competitor. The cost of this defense should be charged to

a. patents and amortized over the legal life of the patent.
b. legal fees and amortized over 5 years or less.
c. expenses of the period.
d. patents and amortized over the remaining useful life of the patent.

A

D.

50
Q
  1. Which of the following is not an intangible asset?
    a. Trade name
    b. Research and development costs
    c. Franchise
    d. Copyrights
A

B

51
Q
  1. Which of the following intangible assets should not be amortized?

a. Copyrights
b. Customer lists
c. Perpetual franchises
d. All of these intangible assets should be amortized.

A

C

52
Q
  1. When a patent is amortized, the credit is usually made to

a. the Patents account.
b. an Accumulated Amortization account.
c. an Accumulated Depreciation account.
d. an expense account.

A

A

53
Q
  1. When a company develops a trademark the costs directly related to securing it should generally be capitalized. Which of the following costs associated with a trademark would not be allowed to be capitalized?

a. Attorney fees.
b. Consulting fees.
c. Research and development fees.
d. Design costs.

A

C.

54
Q
  1. In a business combination, the excess of the cost of the purchase over the fair value of the identifiable net assets purchased is

a. other assets.
b. indirect costs.
c. goodwill.
d. a bargain purchase.

A

C.

55
Q
  1. Goodwill may be recorded when

a. it is identified within a company.
b. one company acquires another in a business combination.
c. the fair value of a company’s assets exceeds their cost.
d. a company has exceptional customer relations.

A

B

56
Q
  1. When a new company is acquired, which of these intangible assets, unrecorded on the acquired company’s books, might be recorded in addition to goodwill?

a. A trade name.
b. A patent.
c. A customer list.
d. All of the above.

A

D

57
Q
  1. Which of the following intangible assets could not be sold by a business to raise needed cash for a capital project?

a. Patent.
b. Copyright.
c. Goodwill.
d. Trade name.

A

C

58
Q
  1. The reason goodwill is sometimes referred to as a master valuation account is because

a. it represents the purchase price of a business that is about to be sold.
b. it is the difference between the fair value of the net identifiable assets as compared
with the purchase price of the acquired business.
c. the value of a business is computed without consideration of goodwill and then
goodwill is added to arrive at a master valuation.
d. it is the only account in the financial statements that is based on value, all other
accounts are recorded at an amount other than their value.

A

B

59
Q
  1. Purchased goodwill should

a. be written off as soon as possible against retained earnings.
b. be written off as soon as possible as an other expense item.
c. be written off by systematic charges as a regular operating expense over the period
benefited.
d. not be amortized.

A

D

60
Q
  1. The intangible asset goodwill may be

a. capitalized only when purchased.
b. capitalized either when purchased or created internally.
c. capitalized only when created internally.
d. written off directly to retained earnings.

A

A

61
Q
  1. A loss on impairment of an intangible asset is the difference between the asset’s

a. carrying amount and the expected future net cash flows.
b. carrying amount and its recoverable amount.
c. recoverable amount and the expected future net cash flows.
d. book value and its fair value.

A

B

62
Q
  1. Recovery of impairment is recognized for all the following except

a. Patent held for sale.
b. Patent held for use.
c. Trademark.
d. Goodwill.

A

D.

63
Q
  1. All of the following are true regarding recovery of impairments for intangible assets except

a. After a recovery of impairment has been recognized, the carrying value of the asset reported on the statement of financial position will be the higher of the fair value less
cost to sell or the value-in-use.
b. No recovery of impairment is allowed for Goodwill.
c. A recovery of impairment will be reported in the “Other income and expense” section
of the income statement.
d. The amount of the recovery is limited to the carrying value of the asset that would
have been reported had no impairment occurred.

A

A

64
Q
  1. Which of the following is not a criteria which must be met before development costs can be capitalized?

a. The company has sufficient financial resources to complete the project.
b. The company intends to complete the project and either use or sell the intangible
asset.
c. The company can reliably identify the research costs incurred to bring the project to
economic feasibility.
d. The project has achieved technical feasibility.

A

C.

65
Q
  1. Which of the following research and development related costs should be capitalized and depreciated over current and future periods?

a. Research and development general laboratory building which can be put to alternative
uses in the future
b. Inventory used for a specific research project
c. Administrative salaries allocated to research and development
d. Research findings purchased from another company to aid a particular research
project currently in process

A

a.

66
Q
  1. Which of the following principles best describes the current method of accounting for research and development costs?

a. Associating cause and effect
b. Systematic and rational allocation
c. Income tax minimization
d. Immediate recognition as an expense

A

D.

67
Q
  1. How should research and development costs be accounted for, according to an IASB Statement?

a. Must be capitalized when incurred and then amortized over their estimated useful lives.
b. Must be expensed in the period incurred.
c. May be either capitalized or expensed when incurred, depending upon the materiality
of the amounts involved.
d. Must be expensed in the period incurred unless it can be clearly demonstrated that the
expenditure will have alternative future uses or unless contractually reimbursable.

A

D

68
Q
  1. Which of the following would be considered research and development?

a. Routine efforts to refine an existing product.
b. Periodic alterations to existing production lines.
c. Marketing research to promote a new product.
d. Construction of prototypes.

A

D

69
Q
  1. Research and development costs

a. are intangible assets.
b. may result in the development of a patent.
c. are easily identified with specific projects.
d. all of the above.

A

B

70
Q
  1. Which of the following is considered research and development costs?

a. Laboratory research aimed at discovery of new knowledge.
b. Application of research findings or other knowledge to a plan or design for a new
product or process.
c. Conceptual formulation and design of possible product or process alternatives.
d. all of the above.

A

D.

71
Q
  1. Which of the following is considered research and development costs?

a. Planned investigation undertaken with the prospect of gaining new scientific or
technical knowledge and understanding.
b. Application of research findings or other knowledge to a plan or design for a new
product or process.
c. Neither a nor b.
d. Both a and b.

A

D

72
Q
  1. Which of the following costs should be capitalized in the year incurred?

a. Research and development costs.
b. Costs to internally generate goodwill.
c. Organizational costs.
d. Costs to successfully defend a patent.

A

D

73
Q
  1. Which of the following costs would be capitalized?

a. Acquisition cost of equipment to be used on current research project only.
b. Engineering costs incurred to advance the product to the full production stage.
c. Cost of research to determine whether a market for the product exists.
d. Salaries of research staff.

A

B

74
Q
  1. Which of the following costs would not be capitalized?

a. Acquisition cost of equipment to be used on current and future research projects.
b. Engineering costs incurred to advance the project to the full production stage.
c. Cost incurred to file for patent.
d. Cost of testing prototype before economic feasibility has been demonstration.

A

D

75
Q
  1. Which of the following costs should be excluded from research and development expense?

a. Modification of the design of a product
b. Acquisition of R & D equipment for use on a current project only
c. Cost of marketing research for a new product
d. Engineering activity required to advance the design of a product to the manufacturing
stage

A

C.

76
Q
  1. If a company constructs a laboratory building to be used as a research and development facility, the cost of the laboratory building is matched against earnings as

a. research and development expense in the period(s) of construction.
b. depreciation deducted as part of research and development costs.
c. depreciation or immediate write-off depending on company policy.
d. an expense at such time as productive research and development has been obtained
from the facility.

A

B

77
Q
  1. Operating losses incurred during the start-up years of a new business should be

a. accounted for and reported like the operating losses of any other business.
b. written off directly against retained earnings.
c. capitalized as a deferred charge and amortized over five years.
d. capitalized as an intangible asset and amortized over a period not to exceed 20 years

A

A.

78
Q
  1. Start-up costs include organizational costs, such as legal and state fees incurred to organize a new business entity. These costs should be

a. capitalized and never amortized.
b. capitalized and amortized over 40 years.
c. capitalized and amortized over 5 years.
d. expensed as incurred.

A

D

79
Q
  1. Which of the following would not be considered an R & D activity?

a. Adaptation of an existing capability to a particular requirement or customer’s need.
b. Application of research findings or other knowledge to a plan for a new product or
process.
c. Laboratory research aimed at discovery of new knowledge.
d. Conceptual formulation and design of possible product or process alternatives.

A

A.

80
Q
  1. Which of the following intangible assets should be shown as a separate item on the statement of financial position?
    a. Goodwill
    b. Franchise
    c. Patent
    d. Trademark
A

A.

81
Q
  1. Which of the following should not be reported under the “Other income and expense” section of the income statement?

a. Goodwill impairment losses.
b. Trade name amortization expense.
c. Recovery of impairment losses
d. All of these choices are correct.

A

B.

82
Q
  1. The total amount of patent cost amortized to date is usually

a. shown in a separate Accumulated Patent Amortization account which is shown contra
to the Patent account.
b. shown in the current income statement.
c. reflected as credits in the Patent account.
d. reflected as a contra property, plant and equipment item.

A

C

83
Q
  1. Intangible assets are reported on the statement of financial position

a. with an accumulated depreciation account.
b. in the property, plant, and equipment section.
c. as a separate item.
d. None of these choices are correct.

A

C.

BSA 12C Intermediate Accounting 1 (32 decks)

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