ch12 Test Bank intermediate accounting

CHAPTER 12 INTANGIBLE INTANGIBLE ASSETS CHAPTER LEARNING OBJECTIVES 1.

Descri Describe be the the charac character terist istics ics of intang intangibl ible e asset assets. s.

2.

Identi Identify fy the cost costs s to includ include e in the initia initiall valuati valuation on of intang intangibl ible e assets. assets.

3.

Explai Explain n the the proce procedure dure for amorti amortizin zing g intan intangib gible le asse assets. ts.

4.

Desc Descri ribe be the the typ types es of of inta intang ngib ible le ass asset ets. s.

.

Explai Explain n the the accou accounti nting ng issu issues es for for reco recordi rding ng good! good!ill ill..

".

Explai Explain n the accoun accountin ting g issues issues relate related d to intang intangibl ible e asset asset impairm impairment ents. s.

#.

Identi Identify fy the conc concept eptual ual issue issues s related related to resea research rch and and develop developmen mentt costs. costs.

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Descri Describe be the accou accounti nting ng for resea research rch and and develop developmen mentt and simila similarr costs. costs.

%.

Indica Indicate te the the presen presentat tation ion of of intang intangibl ible e assets assets and and relate related d items. items.

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12 & 2

Test Bank for Intermediate Ao!ntin"# I$RS Edition# 2e

TR%E&$ALSE'Cone(t!a) 1.

Intangible Intangible assets assets derive derive their their value from the right right &claim &claim'' to receive receive cash cash in the future future..

2.

(ll resea research rch phase phase and and develo developme pment nt phase phase cost costs s are expen expensed sed as incu incurre rred. d.

3.

)ese )esear arch ch phas phase e cost costs s are are capi capita talilize zed d as an inta intang ngib ible le asse assett once once the the pro* pro*ec ectt has has economic viability. viability.

4.

+omp +ompan anie ies s are are re,u re,uir ired ed to asses assess s the the esti estima mate ted d usef useful ul life life and and salv salvag age e valu value e of intangible assets at least annually.

.

Impair Impairmen mentt testing testing is conduc conducted ted annuall annually y for both both limitedlimited-lif life e and indefin indefinite iteli life fe intangib intangible le assets.

".

(mortization of limitedlife intangible assets assets should not be impacted impacted by expected residual values.

#.

/ome /ome intang intangibl ible e assets assets are are not re,uire re,uired d to be amort amortize ized d every every year year..

$.

0imite 0imitedl dlife ife intang intangibl ibles es are amortiz amortized ed by systema systematic tic charge charges s to expense expense over their their useful useful life.

%.

he cost cost of ac,ui ac,uirin ring g a customer customer list list from from another another compa company ny is recor recorded ded as an intan intangib gible le asset.

1.

he cost cost of purcha purchased sed paten patents ts should should be amorti amortized zed over over the remai remainin ning g legal life life of the patent.

11. 11.

If a ne! patent patent is ac,uir ac,uired ed through through modifi modificat cation ion of an existi existing ng patent patent the the remainin remaining g boo value of the original patent may be amortized over the life of the ne! patent.

12.

In a busine business ss combinat combination ion a company company assigns assigns the the cost cost !here !here possible possible to the the identifi identifiable able tangible and intangible assets !ith the remainder recorded as good!ill.

13. 13.

5ood! 5ood!ililll is consi conside dere red d a mast master er valua valuati tion on accoun accountt beca becaus use e it measur measures es the value value of specifically identifiable intangible assets.

14.

Intern Internall ally y generat generated ed good! good!ill ill should should not not be capita capitaliz lized ed in the accou accounts nts..

1.

Intern Internall ally y generat generated ed good! good!ill ill associ associate ated d !ith a busine business ss may be recor recorded ded as an asset asset !hen a firm offer to purchase that business unit has been received.

1". 1".

(ll (ll inta intang ngib ible les s are are sub* sub*ec ectt to peri period odic ic cons consid ider erat atio ion n of impa impair irme ment nt !ith !ith corr corres espo pond ndin ing g potential !ritedo!ns.















Intangible (ssets

12 & ,

1$.

( cash cashgen genera eratin ting g unit is the the smalles smallestt identif identifiab iable le group group of assets assets in a busines business s that can can generate cash flo! independently of the cash flo!s from the business6s other assets.

1%.

he impai impairme rment nt test test for good!i good!illll is conduct conducted ed based based on the cashg cashgene enerat rating ing unit unit to !hich !hich the good!ill has been assigned.

2.

)ecove )ecoverie ries s of impair impairmen ments ts for intang intangibl ible e longlive longlived d assets assets are reported reported in 7other 7other income income and expense7 on the income statement.

21.

( recove recovery ry of impair impairmen mentt for an intangi intangible ble longli longlived ved asset asset is limit limited ed to the carryi carrying ng value value that !ould have been reported had the impairment not occurred.

22.

(fter (fter an impairm impairment ent loss loss is recorded recorded for for a limite limitedl dlife ife intang intangibl ible e asset asset the recove recoverab rable le amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

23.

(fter (fter an impair impairmen mentt loss is recor recorded ded for for good!ill good!ill the recover recoverabl able e amount amount become becomes s the basis for the impaired asset and is used to calculate amortization in future periods.

24.

(ccounting (ccounting for for impairme impairments nts for for limitedl limitedlife ife intangi intangible ble assets assets follo! follo!s s the same same rules rules used used to account for impairments of plant and e,uipment.

2.

I8)/ I8)/ permits permits reversa reversals ls of impairme impairment nt losses losses for all limited limited and indefi indefinit niteli elife fe intangi intangible ble assets.

2".

9eriod 9eriodic ic altera alteratio tions ns to existi existing ng product products s are an example example of resear research ch and develo developme pment nt costs.

2#.

)esearch )esearch and and development development costs costs that that result result in patents patents may be capitali capitalized zed to the extent extent of of the fair value of the patent.

2$.

I8)/ I8)/ re,uires re,uires that that start startup up costs costs and initi initial al operati operating ng losses losses during during the early early years years be capitalized.

2%.

)esear )esearch ch and devel developm opment ent costs costs are are recorde recorded d as an intangi intangible ble asset asset ifif it is felt felt they !ill !ill provide economic benefits in future years.

3. 3.

+ont +ontra ra acco accoun unts ts must must be repo report rted ed for for inta intang ngib ible le asse assets ts in a mann manner er simi simila larr to the reporting of property plant and e,uipment.

Tr!e Tr!e $a)se Ans*ers' Cone(t!a) Item Ans+

1. 2. 3.

8 8 8

Item

Ans+

Item

Ans+

Item

". #. $.

8  

11. 12. 13.

  8

1". 1#. 1$.

Ans+

  

Item

21. 22. 23.

Ans+

  8

Item

2". 2#. 2$.

Ans+

8 8 8















12 & .


-%LTIPLE CHOICE'Cone(t!a) 31.

:hich :hich of of the the follo! follo!ing ing does does not descri describe be intan intangib gible le asset assets; s; a. hey hey lac lac physic physical al exi existe stence nce.. b. hey hey are are mon monet etar ary y asse assets ts.. c. hey hey prov provide ide longt longterm erm benefi benefits. ts. d. hey hey are clas classif sified ied as long longte term rm asset assets. s.

32.

:hich :hich of the the follo!i follo!ing ng charact characteri eristi stics cs do intan intangib gible le assets assets poss possess ess; ; a. 9hys 9hysic ical al exis existe tenc nce. e. b. +laim +laim to a speci specific fic amou amount nt of cash cash in in the futur future. e. c. 0ongli lived. d.
33. 33.

:hic :hich h char charac acte teri rist stic ic is not possessed possessed by intangible assets; a. 9hys 9hysic ical al exis existe tenc nce. e. b. Ident dentif ifiiable able.. c. )esu )esult lt in in futu future re ben benef efit its. s. d. Expen Expensed sed over over curren currentt and=or and=or future future years years..

34.

+osts +osts incurr incurred ed inte interna rnally lly to create create intang intangibl ibles es are are a. capit apital aliz ized ed.. b. capita capitaliz lized ed if they they have an inde indefin finite ite life. life. c. expe expens nsed ed as incu incurr rred ed.. d. expen expensed sed only only if they they have have a limit limited ed life. life.

3.

:hich :hich of the follo! follo!ing ing costs costs incurre incurred d internal internally ly to create create an intangi intangible ble asset asset is general generally ly expensed; a. )ese )esearc arch h phas phase e cos costs ts.. b. 8ilin iling g cos costs ts.. c. 0egal co costs. d. (ll of thes these e choic choices es are are corr correct ect..

3".

he ma*o ma*orr problem problem of of accoun accountin ting g for inta intangi ngible bles s is deter determin mining ing a. fair va value. b. sepa separa rabi bilility ty.. c. salv alvage age val value ue.. d. usef useful ul life life..

3#. 3#.

+opy +opyrig right hts s sho shoul uld d be be amo amort rtiz ized ed over over a. thei theirr leg legal al life life.. b. the life life of of the creat creator or plus plus fifty fifty years years.. c. t!en t!enty ty years ears.. d. their useful useful life or legal legal life life !hichev !hichever er is shorter shorter..















Intangible (ssets

/

12 & 0

3%.

0imite 0imitedl dlife ife intang intangibl ibles es are report reported ed at their their a. repl replac acem emen entt cost cost.. b. carryi carrying ng amoun amountt unles unless s impai impaired red.. c. ac,u ac,uis isit itio ion n cos cost. t. d. li,u li,uid idat atio ion n value value..

4.

:hich of the the follo!i follo!ing ng methods methods of of amortizat amortization ion is normally normally used used for for intangible intangible assets; assets; a. /umof /umofth they eyears ears>d >digi igits ts b. /tra /traiight ghtli line ne c. ?nit ?nits s of pro produ duct ctio ion n d. Doub Double led dec eclilinin ningb gbal alan ance ce

41.

he cost cost of an an intang intangibl ible e asset asset incl include udes s all of the the foll follo!i o!ing ng e/e(t a. purc purcha hase se pric price. e. b. legal fe fees. c. othe otherr incid inciden enta tall expen expense ses. s. d. all all of thes these e are are inc inclu lude ded. d.

42. 42.

8act 8actor ors s cons consid idere ered d in determ determin inin ing g an inta intang ngib ible le asset6 asset6s s usef useful ul life inclu include de all all of the follo!ing e/e(t a. the expect expected ed use use of the the asset. asset. b. any legal legal or contractu contractual al provision provisions s that may may limit limit the useful useful life. life. c. any provisio provisions ns for rene!a rene!all or extension extension of of the asset6 asset6s s legal life. life. d. the amorti amortizat zation ion method method used. used.

43.

?nder ?nder curren currentt accoun accountin ting g practice practice intang intangibl ible e assets assets are clas classif sified ied as a. amorti amortizab zable le or unamor unamortiz tizabl able. e. b. limite limitedli dlife fe or indefi indefinit nitel elife ife.. c. specif specifica ically lly identif identifiab iable le or good!ill good!illty type. pe. d. legall legally y restri restricte cted d or good!i good!illt lltyp ype. e.

44.

+ompanies +ompanies should should evaluate evaluate indefinite indefinite life intangible intangible assets assets at at least least annually annually for@ for@ a. reco recove vera rabi bilility ty.. b. amor amorttizat izatio ion. n. c. impairment. d. esti estima mate ted d usef useful ul lif life. e.

4.

Ane factor factor that is not not consider considered ed in determining determining the useful useful life life of an intangi intangible ble asset asset is is a. salvage value. b. provisions for rene!al or extension. c. legal life. d. expected actions of competitors.

4". 4".

:hic :hich h int intan angi gibl ble e asse assets ts are are amor amorti tize zed; d; 0imited0ife Indefinite0ife















12 & 


4#.

he cost cost of purcha purchasin sing g patent patent rights rights for a produc productt that might might other! other!ise ise have have seriou seriously sly competed !ith one of the purchaser>s pur chaser>s patented products should be a. charge charged d off off in the curren currentt perio period. d. b. amortized amortized over the the legal legal life life of the purchas purchased ed patent. patent. c. added to factory factory overhe overhead ad and allocated allocated to product production ion of the purchas purchaser>s er>s product. product. d. amortized amortized over over the remaining remaining estimated estimated life life of the original original patent patent covering covering the product product !hose maret !ould have been impaired by competition from the ne!ly patented product.

4$.

road! road!ay ay +orpora +orporatio tion n !as granted granted a patent patent on a product product on anua anuary ry 1 24. 24. o o prote protect ct its patent the corporation purchased on anuary 1 21 a patent on a competing product !hich !as originally issued on anuary 1 211. ecause of its uni,ue plant road!ay +orporation does not feel the competing patent can be used in producing a product. he cost of the competing patent should be a. amorti amortized zed over over a maxi maximum mum perio period d of 2 year years. s. b. amorti amortized zed over over a maxi maximum mum perio period d of 1" year years. s. c. amorti amortized zed over over a max maximu imum m period period of of % years years.. d. expe expens nsed ed in 21 21..

4%.

:rigle :riglee e Inc. Inc. !ent to court court this this year and succes successfu sfully lly defen defended ded its paten patentt from infrin infringe ge ment by a competitor. he cost of this defense should be charged to a. patents patents and amortized amortized over over the legal life of of the patent. patent. b. legal legal fees fees and amort amortize ized d over  years years or or less. less. c. expe expens nses es of the the peri period od.. d. patents patents and amortiz amortized ed over the the remaining remaining useful useful life life of the the patent. patent.

. .

:hic :hich h of the the foll follo! o!in ing g is is not an intangible asset; a. rade name b. )esearc )esearch h and and devel developm opment ent costs costs c. 8ranchise d. +opyr pyrights

1.

:hich :hich of the follo! follo!ing ing intang intangibl ible e asse assets ts should should not be amortized; a. +opyr pyrights b. +ust +ustom omer er list lists s c. 9erp 9erpet etua uall fran franch chis ises es d. (ll of of these these intangi intangible ble assets assets should should be amorti amortized. zed.

2.

:hen :hen a pate patent nt is is amort amortize ized d the the cred credit it is is usual usually ly made made to a. the the 9at 9aten ents ts acco accoun unt. t. b. an (ccum (ccumula ulated ted (mor (mortiz tizati ation on account account.. c. an (ccu (ccumul mulate ated d Depreci Depreciati ation on accoun account. t. d. an exp expen ense se acc accou ount nt..

3.

:hen :hen a company company develo develops ps a tradema trademar r the cost costs s direct directly ly relate related d to securin securing g it should should

















Intangible (ssets

12 & 

4.

In a busine business ss combin combinati ation on the the excess excess of the the cost cost of the purch purchase ase over over the fair fair value value of the identifiable net assets purchased is a. othe otherr ass asset ets s. b. indi indire rect ct cost costs. s. c. good!ill. d. a barg bargai ain n purc purcha hase se..

. .

5ood 5ood! !ill ill may may be reco record rded ed !hen hen a. it is is ident identifi ified ed !ith !ithin in a comp company any.. b. one company company ac,uires ac,uires another another in a business business combina combination. tion. c. the fair fair value value of a company6s company6s assets assets exceeds exceeds their their cost. cost. d. a company company has exceptional exceptional customer customer relations. relations.

".

:hen :hen a ne! company company is ac,ui ac,uired red !hich !hich of these these intangi intangible ble asset assets s unrec unrecord orded ed on the ac,uired company6s boos might be recorded in addition to good!ill; a. ( trad trade e nam name. e. b. ( patent. c. ( cust custom omer er list list.. d. (ll (ll of of the the abov above. e.

#.

:hich :hich of the the follo! follo!ing ing intang intangibl ible e assets assets could could not be sold sold by a busines business s to raise raise needed needed cash for a capital pro*ect; a. 9atent. b. +opyri pyrig ght. c. 5ood!ill. d. rade na name.

$.

he reason reason good!ill good!ill is sometimes sometimes referred referred to as a master master valuati valuation on account account is is because because a. it represents represents the purchase purchase price price of a busines business s that is is about to to be sold. sold. b. it is the differen difference ce bet!een bet!een the fair value value of the net identif identifiab iable le assets assets as compar compared ed !ith the purchase price of the ac,uired business. c. the the valu value e of a busi busine ness ss is comp comput uted ed !ith !ithou outt cons consid ider erat atio ion n of good good!i !illll and and then then good!ill is added to arrive at a master valuation. d. it is the the only only accoun accountt in the fina financ ncia iall stat statem emen ents ts that that is based based on valu value e all othe other r accounts are recorded at an amount other than their value.

















12 & 3


"1.

( loss on impairm impairment ent of an intangib intangible le asset asset is the diffe difference rence bet!een bet!een the asset6s asset6s a. carrying carrying amount amount and the expecte expected d future future net cash cash flo!s flo!s.. b. carryi carrying ng amount amount and and its recov recovera erable ble amoun amount. t. c. recoverable recoverable amount and the the expected expected future future net cash cash flo!s. flo!s. d. boo boo valu value e and and its its fair fair valu value. e.

"2.

)ecove )ecovery ry of impair impairmen mentt is reco recogni gnized zed for all the the foll follo!i o!ing ng e/e(t a. 9ate 9atent nt held held for for sal sale. e. b. 9ate 9atent nt hel held d for for use. use. c. rademar. d. 5ood!il d!illl.

"3.

(ll of the follo! follo!ing ing are true regarding regarding recovery recovery of impairm impairments ents for intangi intangible ble assets assets e/e(t a. (fter (fter a recove recovery ry of impair impairmen mentt has been recogn recognize ized d the carrying carrying value value of the asset reported on the statement of financial position !ill be the higher of the fair value less cost to sell or the valueinuse. b. Co recovery recovery of impairm impairment ent is is allo!ed allo!ed for for 5ood!il 5ood!ill. l. c. ( recovery recovery of impairment impairment !ill !ill be reported reported in the 7Ather 7Ather income income and expense7 expense7 section section of the income statement. d. he amount amount of the recover recovery y is limited limited to the carrying carrying value value of the asset that that !ould !ould have been reported had no impairment occurred.

"4.

:hic :hich h of of the the follo ollo! !ing ing is is not a criteria !hich must be met before development costs can be capitalized; a. he company company has suffi sufficient cient financi financial al resources resources to complete complete the the pro*ect. pro*ect. b. he compan company y intends intends to complete complete the pro*ec pro*ectt and either use or sell the intang intangibl ible e asset. c. he compan company y can reliably reliably identify identify the researc research h costs incurr incurred ed to bring bring the pro*ect pro*ect to economic feasibility. feasibility. d. he pro*ect pro*ect has achieved achieved techni technical cal feasibilit feasibility. y.

".

:hich :hich of the follo! follo!ing ing researc research h and develop developmen mentt related related costs costs should should be capita capitaliz lized ed and depreciated over current and future periods; a. )esearch )esearch and developme development nt general general laboratory laboratory building building !hich !hich can be put to alternati alternative ve uses in the future

















Intangible (ssets

12 & 4

"#. "#.

"$.

:hich :hich of the the follo! follo!ing ing !oul !ould d be consid considere ered d researc research h and devel developm opment ent; ; a. )outine )outine efforts efforts to refine refine an existi existing ng product. product. b. 9eriodic 9eriodic alterat alterations ions to existi existing ng producti production on lines. lines. c. Faret Fareting ing resea research rch to to promot promote e a ne! produ product. ct. d. +onstr +onstruct uction ion of protot prototyp ypes. es.

"%. "%.

)ese )esear arch ch and and dev devel elop opme ment nt cos costs ts a. are are int intan angi gibl ble e asse assets ts.. b. may resu result lt in the the develo developme pment nt of a paten patent. t. c. are easily easily ident identifi ified ed !ith !ith specific specific pro*e pro*ects cts.. d. all all of of the the abo above ve..

#.

:hich :hich of the the follo! follo!ing ing is cons conside idered red resea research rch and and develo developme pment nt costs; costs; a. 0aboratory 0aboratory researc research h aimed aimed at discov discovery ery of ne! no!led no!ledge. ge. b. (ppl (pplic icat ation ion of rese researc arch h find findin ings gs or othe otherr no! no!le ledg dge e to a plan plan or desi design gn for a ne! ne! product or process. c. +onceptual +onceptual formulat formulation ion and design design of possible possible product product or process process alternati alternatives. ves. d. all all of of the the abo above ve..

#1.

:hich :hich of the the follo! follo!ing ing is cons conside idered red resea research rch and and develo developme pment nt costs; costs; a. 9lan 9lanne ned d inve invest stig igat atio ion n unde undert rta aen en !ith !ith the the pros prospe pect ct of gain gainin ing g ne! ne! scie scient ntif ific ic or technical no!ledge and understanding. b. (ppl (pplic icat ation ion of rese researc arch h find findin ings gs or othe otherr no! no!le ledg dge e to a plan plan or desi design gn for a ne! ne! product or process. c. Ceit either her a nor nor b. b.

















12 & 15


#4.

:hich :hich of of the the foll follo!i o!ing ng cost costs s !ould !ould not be capi capital talize ized; d; a. (c,uisiti (c,uisition on cost of e,uipmen e,uipmentt to be used on current current and future future research research pro*ect pro*ects. s. b. Engineering Engineering costs costs incurred incurred to advance advance the pro*ec pro*ectt to the full product production ion stage. stage. c. +ost +ost incur incurred red to file file for patent patent.. d. +ost of testin testing g prototype prototype before before economic economic feasibil feasibility ity has been been demonstratio demonstration. n.

#.

:hi :hich of the follo!in o!ing g costs should be e/)!ded from from resear research ch and develo developme pment nt expense; a. Fodifi Fodificat cation ion of of the desi design gn of a prod product uct b. (c,uisiti (c,uisition on of ) G D e,uipmen e,uipmentt for use use on a current current pro*ect pro*ect only only c. +ost +ost of maret mareting ing resea research rch for for a ne! prod product uct d. Engineering Engineering activit activity y re,uired re,uired to advance advance the design design of a product to the the manufactur manufacturing ing stage

#".

If a company company const construc ructs ts a laborat laboratory ory build building ing to be used used as a research research and and develop developmen mentt facility facility the cost of the laboratory building is matched against earnings as a. research research and develop development ment expense expense in the the period&s' period&s' of of construct construction. ion. b. depreciatio depreciation n deducted deducted as part part of research research and and development development costs costs.. c. depreciatio depreciation n or immediate immediate !riteo !riteoff ff depending depending on on company company policy policy.. d. an expense expense at such such time as producti productive ve research research and developm development ent has been obtain obtained ed from the facility.

##.

Aperat Aperating ing losse losses s incurre incurred d during during the start startup up year years s of a ne! busine business ss should should be a. accounted accounted for and and reported reported lie the the operating operating losses losses of any other other business. business. b. !ritten !ritten off off directly directly against against retained retained earning earnings. s. c. capitalize capitalized d as a deferr deferred ed charge charge and amortized amortized over over five five years. years. d. capitalize capitalized d as an intangible intangible asset asset and amortize amortized d over a period period not to exceed exceed 2 years. years.

#$. #$. /tar /tart tup up cost costs s incl includ ude e orga organi niza zati tion onal al cost costs s such as lega legall and and stat state e fees fees incu incurr rred ed to organize a ne! business entity. hese costs should be a. capita capitaliz lized ed and and never never amorti amortized zed.. b. capita capitaliz lized ed and amor amortiz tized ed over over 4 years years.. c. capita capitaliz lized ed and amorti amortized zed over over  years years.. d. expe expens nsed ed as incu incurr rred ed..

















Intangible (ssets

12 & 11

$1. :hich :hich of the follo! follo!ing ing should should not be reporte reported d under the HAthe HAtherr income income and expense expense section of the income statement; a. 5ood! 5ood!ill ill impair impairmen mentt losses losses.. b. rade rade name name amort amortiza izatio tion n expen expense. se. c. )ecove )ecovery ry of impair impairmen mentt losses losses d. (ll of thes these e choic choices es are are corr correct ect.. $2. he total total amount of patent patent cost amortized amortized to date date is usually usually a. sho!n sho!n in a separate (ccum (ccumulated ulated 9atent 9atent (morti (mortizatio zation n account !hich !hich is sho!n sho!n contra to the 9atent account. b. sho!n sho!n in in the curr current ent inco income me state statemen ment. t. c. reflec reflected ted as as credit credits s in the 9ate 9atent nt accou account. nt. d. reflected reflected as as a contra contra property property plant plant and and e,uipment e,uipment item. item. $3. Intangible Intangible assets assets are reported reported on the statement statement of of financial financial position position a. !ith !ith an accumul accumulate ated d deprecia depreciatio tion n account. account. b. in the the property property plant plant and e,uipme e,uipment nt section section.. c. as a sep separ arat ate e ite item. m. d. Cone Cone of thes these e choic choices es are are corre correct. ct.

-!)ti()e C6oie Ans*ers' Cone(t!a) Item

31. 32. 33. 34. 3. 3". 3#. 3$.

Ans+

b c a c a d d d

Item

3%. 4. 41. 42. 43. 44. 4. 4".

Ans+

b b d d b c a b

Item

4#. 4$. 4%. . 1. 2. 3. 4.

Ans+

d c d b c a c c

Item

. ". #. $. %. ". "1. "2.

Ans+

b d c b d a b d

Item

"3. "4. ". "". "#. "$. "%. #.

Ans+

a c a d d d b d

Item

#1. #2. #3. #4. #. #". ##. #$.

-%LTIPLE CHOICE'Com(!tationa)

Ans+

d d b d c b a d

Item

#%. $. $1. $2. $3.

Ans+

a a b c c



















12 & 12


$". Fini +orp. +orp. ac,uires ac,uires a patent patent from Faxi +o. +o. in exchange exchange for 2 2 shares shares of Fini Fini +orp.6s +orp.6s J par value ordinary shares and J$ cash. :hen the patent !as initially issued to Faxi +o. Fini +orp.6s shares !ere selling at J#. per share. :hen Fini +orp. ac,uired the patent its shares !ere selling for J% a share. Fini +orp. should record the patent at !hat amount; a. J %# b. J13# c. J1# d. J $ $#. (lonzo (lonzo +o. ac,uires ac,uires 3 patents patents from from /ha, +orp. +orp. for a total of J3 J3. . he patent patents s !ere carried on /ha,6s boos as follo!s@ 9atent ((@ JK 9atent @ J2K and 9atent ++@ J3. :hen (lonzo ac,uired the patents their fair values !ere@ 9atent ((@ J2K 9atent @ J24K and 9atent ++@ J". (t !hat amount should (lonzo record 9atent ; a. J1 b. J24 c. J2 d. J22 $$. eff +orpora +orporation tion purchased purchased a limited limitedlife life intangib intangible le asset for for J1 J1 on Fay 1 213. 213. It has a useful life of 1 years. :hat total amount of amortization expense should have been recorded on the intangible asset by December 31 21; a. J  b. J3

















Intangible (ssets

12 & 1,

%1. E0A +orporati +orporation on purchased purchased a patent patent for J13 J13 on on /eptember /eptember 1 213. ItIt had a useful useful life of 1 years. An anuary 1 21 E0A spent J33 to successfully defend the patent in a la!suit. E0A feels that as of that date the remaining useful life is  years. :hat amount should be reported for patent amortization expense for 21; a. J3%. b. J3. c. J2$2. d. J234. %2. %2.

Dan Dans s +orp +orpor orat atio ion n purc purcha hase sed d a patent patent for J4 J4   on /epte /eptemb mber er 1 213. 213. It had a useful life of 1 years. An anuary 1 21 Dans spent J132 to successfully defend the patent in a la!suit. Dans feels that as of that date the remaining useful life is  years. :hat amount should be reported for patent amortization expense for 21; a. J1344. b. J12. c. J123". d. J %3".

%3.

he general general ledger ledger of of Lanc Lance e +orporati +orporation on as of of December December 31 31 21 21 includes includes the the follo!i follo!ing ng accounts@ +opyrights Depos eposit its s !it !ith h adv adver erti tisi sing ng agen agency cy &!il &!illl be be used used to prom promo ote good good! !ill' ill' ond sining fund Excess of cost over fair value of identifiable net assets of (c,uired subsidiary

J 3 2# 2#  # 3%

















12 & 1.


%. %.

Day Day +ompa +ompany ny purch purchas ased ed a pate patent nt on anua anuary ry 1 214 214 for J4$ J4$ . . he pate patent nt had a remaining useful life of 1 years at that date. In anuary of 21 Day successfully defends the patent at a cost of J21" extending the patent6s life to 12=31=2". :hat amount of amortization expense !ould Merr record in 21; a. J4$ b. J4 c. J$ d. J#2

%".

An anuar anuary y 2 21 21 Mlein Mlein +o. bought bought a tradema trademar r from from )oyce )oyce Inc. Inc. for for J12 J12 .. (n independent research company estimated that the remaining useful life of the trademar !as 1 years. Its unamortized cost on )oyce6s boos !as J%. In Mlein6s 21 income statement !hat amount should be reported as amortization expense; a. J12. b. J %. c. J " ". d. J 4.

%#. ( company company ac,uires ac,uires a patent patent for a drug drug !ith !ith a remaining remaining legal legal and useful useful life of of six years years on anuary 1 213 for J21. he company uses straightline amortization for patents. An anuary 2 21 a ne! patent is received for a timedrelease version of the same drug. he ne! patent has a legal and useful life of t!enty years. he least amount of amortization that could be recorded in 21 is a. J3. b. J #.

















Intangible (ssets

12 & 10

1. 8loyd 8loyd +ompany purchases purchases s assets !hen ac,uired !ere as follo!s@ +urrent assets Concurrent assets

J 4 12" J1$

















12 & 1

Test Bank for Intermediate Ao!ntin"# I$RS Edition# 2e %se t6e fo))o*in" information for 7!estions 15, and 15.+

An anuary 1 214 ingham ingham Inc. purchased a patent !ith a cost N232 N232 a useful useful life of  years. years. he compan company y uses uses straig straight htlin line e deprec depreciat iation ion.. (t Decemb December er 31 21 21 the compan company y determines that impairment indicators are present. he fair value less costs to sell the patent is estimated to be N1$. he patent>s valueinuse is estimated to be N113. he asset>s remaining useful life is estimated to be 2 years. 13. ingham>s ingham>s 21 income income stateme statement nt !ill !ill report 0oss 0oss on Impairment Impairment of a. N. b. N2"2. c. N312. d. N1 N11% 1% . . 14. he company>s company>s 21" income income statement statement !ill report report amortization amortization expense expense for the patent of a. J3##. b. J4"4. c. J". d. J1 J11% 1% . . 1. An (ugust (ugust 1 214 214 0i Inc. purchased purchased a license license !ith !ith a cost of s value inuse is estimated to be s 21" income statement !ill report 0oss on Impairment of



















Intangible (ssets

12 & 1

1#. he company company>s >s 21 21 income income statemen statementt !ill !ill report report a. (morti (mortizat zation ion Expe Expense nse of +<8 +<84# 4# . . b. (mortizati (mortization on Expense Expense of +<8 +<8  and 0oss on Impairme Impairment nt of +<811 +<811. . c. (mortizati (mortization on Expense Expense of +<84# +<84#  and a 0oss on Impair Impairment ment of +<8. +<8. d. 0oss 0oss on impa impairm irment ent of of +<814 +<814 . . 1$. An une 2 21 21 0indt 0indt Inc. purchase purchased d a trademar trademar !ith !ith a cost N%44. N%44. he he trademar trademar is classified as an indefinitelife intangible asset. (t December 31 21 and December 31 21" the follo!ing information is available for impairment testing@ 12 12=31=21 12=31=21" 8air value less costs to sell N%11 N% Lalueinuse N%3# N% he 21" income statement !ill report

















12 & 13

111.


An une 2 21 21 Alse Alsen n Inc. Inc. purch purchas ased ed a trad tradem emar ar  !ith !ith a cost cost N23" N23" . . he trademar trademar is classified classified as an indefinite indefinitelife life intangible intangible asset. asset. (t December December 31 21 and December 31 21" the follo!ing is available for impairment testing@ 8air value less costs to sell Lalueinuse

12=31=21 N22$ N234

12=31=21" N22" N23%

he 21" income statement !ill report a. no Impair Impairmen mentt 0oss or or )ecover )ecovery y of Impair Impairmen ment. t. b. Impair Impairmen mentt 0oss 0oss of N2 N2. . c. )ecove )ecovery ry of of Impai Impairme rment nt of of N2 N2. . d. )ecove )ecovery ry of of Impai Impairme rment nt of N N. . 112. 112.

oyo oyo Enterpris Enterprises es has four divis divisions. ions. It ac,uired ac,uired on of them them 5reen 5reen 9roducts 9roducts on anuary anuary

















Intangible (ssets

12 & 14

11. 11. An (ugust (ugust 1 214 :ei Inc. Inc. purchased purchased a licens license e !ith !ith a cost cost of s valueinuse is estima estimated ted to be s :ei>s 21" 21" income income statem statement ent !ill !ill report report 0oss 0oss on Impairment of a.
An anuary 2 21 (ce Inc. purchased a patent !ith a cost +<82$2 and a useful life of 4 years. (t December 31 21 and December 31 21" the company determines that impairment indicators are present. he follo!ing information is available for impairment testing at each year

















12 & 25


11%. 11%.
















Intangible (ssets

12 & 21

123. 0oazia 0oazia Inc. incurred incurred the follo! follo!ing ing costs during during the year year ended Decembe Decemberr 31 21@ 0aboratory research aimed at discovery of ne! no!ledge +osts of testing prototype and design modifications &economic viability not achieved' Puality control during commercial production including routine testing of products +onstruction of research facilities having an estimated useful life of " years but no alternative future use

J2 4 2# 3"

he total amount to be classified and expensed as research and development in 21 is a. J1. b. J$#. c. J". d. J31.



















12 & 22


-!)ti()e C6oie Ans*ers' Com(!tationa) Item

$4. $.

Ans+

d d

Item

%2. %3.

Ans+

Item

Ans+

Item

Ans+

Item

Ans+

Item

Ans+

b c

1. 11.

d b

1$. 1%.

c a

11". 11#.

a c

124. 12.

a a

















Intangible (ssets 13. 13.

12 & 2,

Ely Ely +o. +o. boug bought ht a pate patent nt from from ade aden n +orp +orp.. on anua anuary ry 1 21 21 for for J3" J3"  .. (n independent consultant retained by Ely estimated that the remaining useful life at anuary 1 21 is 1 years. Its unamortized cost on aden6s accounting records !as J1$K the patent had been amortized for  years by aden.
















12 & 2.

13. 13.


During During 21 21 0eon 0eon +o. incurr incurred ed the the foll follo! o!ing ing cost costs@ s@ esting in search for process alternatives +osts of mareting research for ne! product Fodification of the formulation of a process )e h and d el nt s vi rf d by 

 +o . for for 0eo

J 3$ 2 1 42 42  

















Intangible (ssets

8ERIVATIONS ' Com(!tationa) :ont+; No+ Ans*er %2. b

8eri9ation J4 - U&J4 S 1' T 1 1=3V R J4"$. &J4"$ Q J132' S  R J12.

12 & 20

















12 & 2


8ERIVATIONS ' Com(!tationa) :ont+; No+ Ans*er 113 b

8eri9ation N2 32 =  R N4"4  T 2 R N%2$ K N2 32 

N%2$  R











































































































































ch12 Test Bank intermediate accounting

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