Question 1

Purchased goodwill should

Accepted Answer

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)  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.

Question 2

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would be considered research and development?

Accepted Answer

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)  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.

Question 4

Which of the following costs would not be capitalized?

Accepted Answer

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)  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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following characteristics do intangible assets possess?

Accepted Answer

A)  Physical existence. 
B)  Claim to a specific amount of cash in the future. 
C)  Long-lived. 
D)  Held for resale. 
A)  Physical existence. 
B)  Claim to a specific amount of cash in the future. 
C)  Long-lived. 
D)  Held for resale.

Question 7

The reason goodwill is sometimes referred to as a master valuation account is because

Accepted Answer

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)  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.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Goodwill may be recorded when

Accepted Answer

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)  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.

Question 10

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

Accepted Answer

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)  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.

Question 11

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?

Accepted Answer

A)  Attorney fees. 
B)  Consulting fees. 
C)  Research and development fees. 
D)  Design costs. 
A)  Attorney fees. 
B)  Consulting fees. 
C)  Research and development fees. 
D)  Design costs.

Question 12

The intangible asset goodwill may be

Accepted Answer

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)  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.

Question 13

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

Accepted Answer

A)  capitalized and never amortized. 
B)  capitalized and amortized over 40 years. 
C)  capitalized and amortized over 5 years. 
D)  expensed as incurred. 
A)  capitalized and never amortized. 
B)  capitalized and amortized over 40 years. 
C)  capitalized and amortized over 5 years. 
D)  expensed as incurred.

Question 14

Which of the following intangible assets should be shown as a separate item on the statement of financial position?

Accepted Answer

A)  Goodwill 
B)  Franchise 
C)  Patent 
D)  Trademark 
A)  Goodwill 
B)  Franchise 
C)  Patent 
D)  Trademark

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

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)  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

Question 19

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.

Accepted Answer

A) True 
 B)False

Purchased goodwill should

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

Which of the following would be considered research and development?

Which of the following costs would not be capitalized?

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

Which of the following characteristics do intangible assets possess?

The reason goodwill is sometimes referred to as a master valuation account is because

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

Goodwill may be recorded when

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

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?

The intangible asset goodwill may be

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

Which of the following intangible assets should be shown as a separate item on the statement of financial position?

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

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.

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

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

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.

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Filters

Exam 12: Intangible Assets

Purchased goodwill should

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

Which of the following would be considered research and development?

Which of the following costs would not be capitalized?

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

Which of the following characteristics do intangible assets possess?

The reason goodwill is sometimes referred to as a master valuation account is because

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

Goodwill may be recorded when

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

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?

The intangible asset goodwill may be

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

Which of the following intangible assets should be shown as a separate item on the statement of financial position?

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

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.

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

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

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.

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Filters