Flashcards and Answers – accounting chapter 12
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Which of the following is not a characteristic of intangible assets? They lack physical existence. They are long-term in nature. They are all subject to amortization. They are not financial instruments.
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They are all subject to amortization.
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Which of the following statements concerning intangible assets is correct? All of these answer choices are correct. Intangible assets include the right to receive cash or cash equivalents at a future date. Intangible assets are normally classified as current assets. Intangible assets derive their value from the rights and privileges granted to the company using them.
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Intangible assets derive their value from the rights and privileges granted to the company using them
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Which of the following is not a characteristic of intangible assets? They lack physical existence. All answer choices are characteristics of intangible assets. They are classified as long-term assets. They are not financial instruments.
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All answer choices are characteristics of intangible assets.
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Expensing all R&D costs associated with internally created intangible assets results in Understating assets and understating expenses. Overstating assets and overstating expenses. Overstating assets and understating expenses. Understating assets and overstating expenses.
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Understating assets and overstating expenses.
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The cost of a purchased intangible asset includes legal fees. purchase price. all of these answer choices are correct. incidental expenses.
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all
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Construction permits are not considered to be intangible assets. contract-related intangible assets. customer-related intangible assets. marketing-related intangible assets.
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contract-related intangible assets
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Which of the following is not one of the major categories of intangibles? Artistic-related. Marketing-related. Financing-related. Contract-related.
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Financing-related.
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Marketing-related intangibles would include a brand name. a franchise. a copyright. a customer list.
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a brand name.
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The difference between the price paid to acquire another company and the fair market value of that company's net assets can be referred to as all of these answer choices are correct. goodwill. a gap filler. a master valuation account.
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all
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The two principal types of patents issued by the U.S. Patent and Trademark Office are process patents and product patents. marketing-related patents and contract-related patents. limited-life patents and indefinite-life patents. artistic-related patents and customer-related patents.
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process patents and product patents.
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On January 1, 2014, Bumper Corp. acquires a customer list for $400,000. Bumper estimates that this customer list will generate value for at least 5 years. At the end of 3 years, Bumper plans to sell the customer list to another company for $62,500. On Bumper's income statement for the year ended December 31, 2014, how much amortization expense should it report? $112,500 $80,000 $67,500 $133,333
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$112,500 ($400,000 - 62,500)/ 3 years = $112,500 annual amortization expense.
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Tiburon Corporation purchased a patent for $1,850,000 on November 30, 2012. It has a remaining legal life of 11 years. Tiburon estimates that the remaining useful life of the patent is useful life of 15 years. What balance will be reported on the December 31, 2014 balance sheet for the patent (if necessary, round your answer to the nearest dollar)? $1,485,606. $1,850,000. $1,583,678. $1,499,621.
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$1,499,621. Total amortization expense charged between November 30, 2012 and December 31, 2014: $1,850,000/ 132 months X 25 months = $350,379. The balance in the Patent account would be: $1,850,000-$350,379 = $1,499,621.
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Coral Corporation began operating as a business in 2014. During January 2014, the company paid $300,000 in design costs to develop its trademark and $250,000 in legal and registration fees to secure the trademark. During October 2014, the company successfully defended its trademark, paying an additional $150,000 in legal fees during the process. At what amount should Coral Corporation report its trademark on its December 31, 2014 balance sheet? $550,000 $400,000 $150,000 $700,000
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$700,000 $300,000 + 250,000 + 150,000 = $700,000.
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Production backlogs fall under which category of intangible assets? Entry field with correct answer Artistic-related. Technology-related. Customer-related. Marketing-related.
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Customer-related.
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Which of the following represents a federally granted right? Franchise. Goodwill. Copyrights. Internet domain names.
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Copyrights.
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Which of the following would not be amortized? Copyright. Customer List. Patent. Trade name.
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Trade name.
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Bryson Corporation purchased a limited-life intangible asset for $1,162,500 on May 1, 2012. It has a remaining useful life of 15 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2014 (if necessary, round your answer to the nearest dollar)? $206,667 $155,000 $66,667 $129,167
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$206,667
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On July 2, 2014, Adele Company bought a trademark from Robert, Inc. for $2,750,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Robert's books was $1,600,000. In Adele's 2014 income statement, what amount should be reported as amortization expense? $275,000. $80,000. $137,500. $160,000.
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$137,500.
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Which of the following is not an example of a contract-related intangible asset? Entry field with correct answer Construction permits. Broadcast rights. Franchise. Copyright.
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Copyright.
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Which of the following is an example of a marketing-related intangible asset? Entry field with correct answer Noncompetition agreements. Broadcast rights. Goodwill. Customer list.
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Noncompetition agreements.
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St. Sebastian Company and A. Jamison Company were combined in a purchase transaction. St. Sebastian was able to acquire Jamison at a bargain price. The fair market value of Jamison's net assets exceeded the price paid by St. Sebastian to acquire the company. Proper accounting treatment by St. Sebastian is to report the excess fair value over purchase price as a loss. a gain. a liability. paid-in capital.
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a gain.
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Capitalizing goodwill only when it is purchased in an arm's-length transaction, and not capitalizing any goodwill generated internally, is an example of GAAP winning out over IFRS. faithful representation winning out over relevance. accrual accounting winning out over cash-basis accounting. financial accounting winning out over managerial accounting.
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faithful representation winning out over relevance.
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When the purchaser in a business combination pays less than the fair value of the identifiable net assets, ________ is recorded by the purchaser. Entry field with correct answer R&D expense. goodwill. a gain. a liability.
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a gain.
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The impairment rule for goodwill involves how many steps? Entry field with correct answer 4 1 3 2
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2
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Which of the following principles best describes the current method of accounting for research and development costs? Entry field with correct answer Income tax minimization Immediate recognition as an expense Systematic and rational allocation Associating cause and effect
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Immediate recognition as an expense
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Which of the following is considered a research activity? Entry field with correct answer Construction of a prototype. Operation of a pilot plant. Critical investigation aimed at discovery of new knowledge. All of these answer choices are correct.
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Critical investigation aimed at discovery of new knowledge.
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Which of the following costs incurred by Berber Corporation are considered R&D costs? Entry field with correct answer Routine ongoing efforts to refine an existing product. Periodic alterations to existing products. Operation of pilot plants. All of these answer choices are correct.
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Operation of pilot plants.
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Costs incurred in the research phase are expensed under GAAP but may be capitalized under IFRS. always expensed under both IFRS and GAAP. always capitalized under both IFRS and GAAP. expensed under IFRS but may be capitalized under GAAP.
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always expensed under both IFRS and GAAP.
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Recovery of impairment is recognized for all the following except: patent held for sale. patent held for use. trademark. goodwill.
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goodwill.
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A loss on impairment of an intangible asset under IFRS is the asset's: recoverable amount less the expected future net cash flows. book value less its fair value. carrying amount less the expected future net cash flows. carrying amount less its recoverable amount.
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carrying amount less its recoverable amount.
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Which of the following statements is correct? IFRS requires capitalization of research and development costs once economic viability is met. GAAP permits capitalization of development costs. IFRS requires capitalization of development costs once economic viability is met. Both IFRS and GAAP permit revaluation of property, plant, and equipment, and intangible assets (except for goodwill).
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IFRS requires capitalization of development costs once economic viability is met.
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Research and development costs are: Entry field with correct answer None of these. expensed under IFRS. expensed under GAAP. expensed under both GAAP and IFRS.
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expensed under GAAP.
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All of the following are key similarities between GAAP and IFRS with respect to accounting for intangible assets except: the accounting for impairments of assets held for disposal. the accounting for intangibles acquired in a business combination. recovery of impairments on intangibles other than goodwill. for accounting purposes, costs associated with research and development activities are segregated into the two components.
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recovery of impairments on intangibles other than goodwill.
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The presentation of intangible assets in the financial statements Entry field with correct answer Includes reporting R & D costs as an expense in the income statement. Involves crediting amortization directly to the intangible asset account. Includes the disclosure of the amortization expense for the next 5 years. All of these answer choices are correct.
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All of these answer choices are correct.
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Which intangible asset should be disclosed separately on the balance sheet? Patents. Goodwill. Customer lists. Copyrights.
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Goodwill.
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All of the following statements regarding IFRS accounting treatments for intangibles are true except: Entry field with correct answer IFRS allows reversal of impairment losses when there has been a change in economic conditions. IFRS permits revaluation on limited-life intangible assets. Under IFRS, costs in the development phase of R & D costs are expensed once technological feasibility is achieved. IFRS permits some capitalization of internally generated intangible assets.
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Under IFRS, costs in the development phase of R & D costs are expensed once technological feasibility is achieved.
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IFRS permits revaluation of Entry field with correct answer All of these answer choices are correct. Limited-life intangible assets. Indefinite-life intangible assets. Goodwill.
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Limited-life intangible assets.
