Question 1

Burger Co. incurred the following costs during 2013 in the development and production of a new product:  
 How much should be included in R&D expense for 2013?

Accepted Answer

A)  $120,000 
B)  $630,000 
C)  $750,000 
D)  $700,000 
A)  $120,000 
B)  $630,000 
C)  $750,000 
D)  $700,000

Question 2

Which of the following is not required to be disclosed in an entity's financial statements or accompanying footnotes?

Accepted Answer

A)  the total amount of research and development costs charged to expense during the current year 
B)  the method used to amortize the entity's intangible assets 
C)  a material amount of internally developed goodwill 
D)  accumulated amortization on the entity's intangibles as of its year-end 
A)  the total amount of research and development costs charged to expense during the current year 
B)  the method used to amortize the entity's intangible assets 
C)  a material amount of internally developed goodwill 
D)  accumulated amortization on the entity's intangibles as of its year-end

Question 3

Costs for which of the following activities would not be included as part of research and development (R&D) costs?

Accepted Answer

A)  testing in search for or evaluation of product or process alternatives 
B)  adaptation of an existing capability to a particular requirement or customer's need as part of a continuing commercial activity 
C)  searching for applications of new research findings or of other knowledge 
D)  design, construction, and testing or preproduction prototypes and models. 
A)  testing in search for or evaluation of product or process alternatives 
B)  adaptation of an existing capability to a particular requirement or customer's need as part of a continuing commercial activity 
C)  searching for applications of new research findings or of other knowledge 
D)  design, construction, and testing or preproduction prototypes and models.

Question 4

The amortization period for a patent is

Accepted Answer

A)  indefinite; patents should be reviewed for impairment annually 
B)  20 years 
C)  20 years or the expected useful life of the patent, whichever is longer 
D)  20 years or the expected useful life of the patent, whichever is shorter 
A)  indefinite; patents should be reviewed for impairment annually 
B)  20 years 
C)  20 years or the expected useful life of the patent, whichever is longer 
D)  20 years or the expected useful life of the patent, whichever is shorter

Question 5

What characteristics do Intangible and tangible noncurrent assets have in common?

Accepted Answer

*Held for use in the course of ordinary

Question 6

Based on GAAP, most software development costs are likely to be

Accepted Answer

A)  expensed as R&D costs 
B)  allocated to inventory and expensed to cost of goods sold when the software is sold 
C)  capitalized and amortized over a 40-year period 
D)  capitalized and amortized over a relatively short period, such as five years 
A)  expensed as R&D costs 
B)  allocated to inventory and expensed to cost of goods sold when the software is sold 
C)  capitalized and amortized over a 40-year period 
D)  capitalized and amortized over a relatively short period, such as five years

Question 7

The Jessie Company acquired a competitor company in January 2015. When Jessie's accountant recorded the purchase, she correctly recorded an amount for goodwill based on the expectation of the acquired company's earning a rate of return on its assets that was in excess of the industry's rate of return. In fact, the acquired company doubled the expected rate of return in 2015 and 2016. As a result of these increased earnings, in early 2017 the president of the Jessie Company asked the company's accountant to increase the amount recognized as goodwill.
Required: 
a.Define the term "goodwill." In addition, discuss several possible factors that might contribute to a company having goodwill.
b.Discuss the accounting treatment under current GAAP for goodwill that is internally developed. Discuss the rationale for this treatment.
c.Discuss the accounting treatment under current GAAP for goodwill that is acquired through an external transaction.
d.Discuss the appropriateness of the president's request to increase the recorded amount of goodwill.

Accepted Answer

a.Goodwill is the price paid for the uni

Question 8

In March of 2014, Marian Corp. applied for a trade name. Legal costs associated with the application were $25,000. At the time of filing the application, the company projected extra annual income to be generated through having the trade name to be $100,000. On Feb. 5, 2016, the company incurred $20,000 in an unsuccessful defense of the trade name.
Required: 
a.What is the amount of income or expense associated with the trade name for the year 2014? For the year 2015? For the year 2016?
b.What is the accounting rationale for the amounts recorded in each year?

Accepted Answer

a.2014: $0
 2015: $0
 2016: $45,000 
b.A

Question 9

During 2013, Debbie Company incurred $240,000 in legal fees in defending a patent with a carrying value of $4,500,000 against an infringement. Debbie's lawyers were not successful with the defense of the patent. The legal fees should be

Accepted Answer

A)  expensed in 2013 and classified as ordinary expense 
B)  classified as an extraordinary item on the income statement for 2013 
C)  capitalized and amortized over the remaining legal life of the patent 
D)  capitalized and amortized over the remaining economic life or legal life of the patent, whichever is shorter 
A)  expensed in 2013 and classified as ordinary expense 
B)  classified as an extraordinary item on the income statement for 2013 
C)  capitalized and amortized over the remaining legal life of the patent 
D)  capitalized and amortized over the remaining economic life or legal life of the patent, whichever is shorter

Question 10

What factors should a company consider when estimating the useful life of an intangible asset?

Accepted Answer

*expected use of the intangible asset
*e

Question 11

Certain activities are listed below. 
a.Testing a new type of machine to evaluate its potential usefulness in production
b.Engineering follow-through in an early phase of commercial production
c.Totalcost of an R&D building-No alternative use
d.Salary of director of R&D
e.Current period depreciation on a building housing R&D activities (alternative future use)
f.General and administrative costs reasonably allocated to R&D projects
g.Patent acquired solely for use in a specific R&D project
Required:
List by letter the activities that would be considered in determining R&D costs.

Accepted Answer

The answer of Certain activities are listed below. 
a.Testing a...

Question 12

Which of the following statements concerning intangibles is true?

Accepted Answer

A)  A copyright should be considered an intangible with an indefinite life. 
B)  Organization costs must be expensed as incurred. 
C)  A patent should be amortized over the shorter of the inventor's life or its economic life. 
D)  The registration of a trademark or trade name lasts for 20 years and is nonrenewable. 
A)  A copyright should be considered an intangible with an indefinite life. 
B)  Organization costs must be expensed as incurred. 
C)  A patent should be amortized over the shorter of the inventor's life or its economic life. 
D)  The registration of a trademark or trade name lasts for 20 years and is nonrenewable.

Question 13

Trademarks are considered to have an indefinite life and are therefore not subject to amortization.

Accepted Answer

A) True 
 B)False

Question 14

Which statement about negative goodwill is true?

Accepted Answer

A)  Negative goodwill is the amount by which the fair value of identifiable net assets acquired exceeds the price paid. 
B)  Negative goodwill results when the cash paid for a company exceeds the fair market value of the net assets acquired. 
C)  Negative goodwill should be recorded as a direct credit to retained earnings. 
D)  Negative goodwill should first be allocated proportionately to reduce the cost of all assets acquired (except long-term investments in marketable securities) on the basis of their relative market values. 
A)  Negative goodwill is the amount by which the fair value of identifiable net assets acquired exceeds the price paid. 
B)  Negative goodwill results when the cash paid for a company exceeds the fair market value of the net assets acquired. 
C)  Negative goodwill should be recorded as a direct credit to retained earnings. 
D)  Negative goodwill should first be allocated proportionately to reduce the cost of all assets acquired (except long-term investments in marketable securities) on the basis of their relative market values.

Question 15

GAAP requires that research and development costs be

Accepted Answer

A)  capitalized 
B)  expensed as incurred 
C)  accumulated until the existence of future benefits is determined 
D)  expensed in part and capitalized in part 
A)  capitalized 
B)  expensed as incurred 
C)  accumulated until the existence of future benefits is determined 
D)  expensed in part and capitalized in part

Question 16

IFRS and GAAP differ in the application of the fair value concept for impairment tests applied to intangible assets.
Required:
Describe the fair value concept as it is applied for impairment tests in IFRS and GAAP, highlighting the differences.

Accepted Answer

As a measure of fair value, GAAP uses th

Question 17

Costs for which of the following activities should not be included in research and development (R&D)?

Accepted Answer

A)  modification of the formulation or design of a product or process 
B)  design of tools, jigs, molds, and dies involving new technology 
C)  design, construction, and testing of preproduction prototypes and models 
D)  trouble-shooting in connection with breakdowns during commercial production 
A)  modification of the formulation or design of a product or process 
B)  design of tools, jigs, molds, and dies involving new technology 
C)  design, construction, and testing of preproduction prototypes and models 
D)  trouble-shooting in connection with breakdowns during commercial production

Question 18

Identifiable intangible assets would include all of the following except

Accepted Answer

A)  patents 
B)  trademarks 
C)  goodwill 
D)  franchises 
A)  patents 
B)  trademarks 
C)  goodwill 
D)  franchises

Question 19

At the date of purchase, materials, equipment, facilities, and intangibles purchased from others that have no alternative future uses in research and development or other activities should be

Accepted Answer

A)  capitalized 
B)  charged directly to retained earnings 
C)  included in R&D expense immediately 
D)  charged as a loss from continuing operations 
A)  capitalized 
B)  charged directly to retained earnings 
C)  included in R&D expense immediately 
D)  charged as a loss from continuing operations

Question 20

On January 1, 2014, Sally, Inc. bought a patent for $100,000. There were ten years left of the patent's legal life. On July 1, 2016, the company successfully defended the patent in court at a cost of $30,000.
Required:
Compute the amount of patent amortization expense for 2016. Assume Sally calculates amortization to the nearest month and uses the straight-line method.

Accepted Answer

Patent amortization

Burger Co. incurred the following costs during 2013 in the development and production of a new product: How much should be included in R&D expense for 2013?

Which of the following is not required to be disclosed in an entity's financial statements or accompanying footnotes?

Costs for which of the following activities would not be included as part of research and development (R&D) costs?

The amortization period for a patent is

What characteristics do Intangible and tangible noncurrent assets have in common?

Based on GAAP, most software development costs are likely to be

During 2013, Debbie Company incurred $240,000 in legal fees in defending a patent with a carrying value of $4,500,000 against an infringement. Debbie's lawyers were not successful with the defense of the patent. The legal fees should be

What factors should a company consider when estimating the useful life of an intangible asset?

Which of the following statements concerning intangibles is true?

Trademarks are considered to have an indefinite life and are therefore not subject to amortization.

Which statement about negative goodwill is true?

GAAP requires that research and development costs be

IFRS and GAAP differ in the application of the fair value concept for impairment tests applied to intangible assets. Required: Describe the fair value concept as it is applied for impairment tests in IFRS and GAAP, highlighting the differences.

Costs for which of the following activities should not be included in research and development (R&D)?

Identifiable intangible assets would include all of the following except

At the date of purchase, materials, equipment, facilities, and intangibles purchased from others that have no alternative future uses in research and development or other activities should be

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 12: Intangibles

Burger Co. incurred the following costs during 2013 in the development and production of a new product: How much should be included in R&D expense for 2013?

Which of the following is not required to be disclosed in an entity's financial statements or accompanying footnotes?

Costs for which of the following activities would not be included as part of research and development (R&D) costs?

The amortization period for a patent is

What characteristics do Intangible and tangible noncurrent assets have in common?

Based on GAAP, most software development costs are likely to be

During 2013, Debbie Company incurred $240,000 in legal fees in defending a patent with a carrying value of $4,500,000 against an infringement. Debbie's lawyers were not successful with the defense of the patent. The legal fees should be

What factors should a company consider when estimating the useful life of an intangible asset?

Which of the following statements concerning intangibles is true?

Trademarks are considered to have an indefinite life and are therefore not subject to amortization.

Which statement about negative goodwill is true?

GAAP requires that research and development costs be

IFRS and GAAP differ in the application of the fair value concept for impairment tests applied to intangible assets. Required: Describe the fair value concept as it is applied for impairment tests in IFRS and GAAP, highlighting the differences.

Costs for which of the following activities should not be included in research and development (R&D)?

Identifiable intangible assets would include all of the following except

At the date of purchase, materials, equipment, facilities, and intangibles purchased from others that have no alternative future uses in research and development or other activities should be

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters