300 FINAL CH 12

91. Thompson Company incurred research and development costs of $100,000 and legal fees of $40,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Thompson record as Patent Amortization Expense in the first year? a. $ -0-. b. $ 4,000. c. $ 7,000. d. $14,000.

b. $ 4,000.

106. The following information is available for Barkley Company's patents: Cost $3,440,000 Carrying amount 1,920,000 Expected future net cash flows 1,600,000 Fair value 1,300,000 Barkley would record a loss on impairment of a. $ 320,000. b. $ 620,000. c. $1,920,000. d. $1,840,000.

b. $ 620,000.

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 these answer choices are correct.

b. may result in the development of a patent.

115. Leeper Corporation incurred the following costs in 2018: Acquisition of R&D equipment with a useful life of 4 years in R&D projects $900,000 Cost of making minor modifications to an existing product 140,000 Advertising expense to introduce a new product 700,000 Engineering costs incurred to advance a product to full production stage 800,000 What amount should Leeper record as research & development expense in 2018? a. $1,025,000 b. $1,090,000 c. $1,500,000 d. $1,790,000

a. $1,025,000

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.

b. one company acquires another in a business combination.

97. On January 2, 2017, Klein Co. bought a trademark from Royce, Inc. for $2,000,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Royce's books was $1,500,000. In Klein's 2017 income statement, what amount should be reported as amortization expense? a. $200,000. b. $150,000. c. $100,000. d. $ 75,000.

a. $200,000.

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. Searching for applications of new research findings. c. Laboratory research aimed at discovery of new knowledge. d. Conceptual formulation and design of possible product or process alternatives.

a. Adaptation of an existing capability to a particular requirement or customer's need.

114. MaBelle Corporation incurred the following costs in 2018: Acquisition of R&D equipment with a useful life of 4 years in R&D projects $800,000 Start-up costs incurred when opening a new plant 140,000 Advertising expense to introduce a new product 700,000 Engineering costs incurred to advance a product to full production stage 600,000 What amount should MaBelle record as research & development expense in 2018? a. $ 800,000 b. $1,040,000 c. $1,400,000 d. $1,540,000

a. $ 800,000

102. General Products Company bought Special Products Division in 2017 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $6,000,000 and it is carried on General Product's books for a total of $5,100,000, including the goodwill. An analysis of Special Products Division's assets indicates that goodwill of $600,000 exists on December 31, 2018. What goodwill impairment should be recognized by General Products in 2018? a. $0. b. $300,000. c. $75,000. d. $450,000.

a. $0.

Which of the following intangible assets should be shown as a separate item on the balance sheet? a. Goodwill b. Franchise c. Patent d. Trademark

a. Goodwill

Which characteristic is not possessed by intangible assets? a. Physical existence. b. Long-lived. c. Result in future benefits. d. Expensed over current and/or future years.

a. Physical existence.

Which of the following is considered research and development costs? a. Planned search or critical investigation aimed at discovery of new knowledge. b. Research costs incurred under contract with another company. c. Commissions to sales staff marketing a new product. d. Cost of marketing research to promote a new product.

a. Planned search or critical investigation aimed at discovery of new knowledge.

Which of the following costs incurred internally to create an intangible asset is generally expensed? a. Research and development costs. b. Filing costs. c. Legal costs. d. All of these answer choices are correct.

a. Research and development costs.

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. Research and development general laboratory building which can be put to alternative uses in the future

Easton Company and Lofton Company were combined in a purchase transaction. Easton was able to acquire Lofton at a bargain price. The sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost of acquiring Easton. Easton will report the excess amount as a. a gain. b. part of current income in the year of combination. c. a deferred credit and amortize it. d. paid-in capital.

a. a gain.

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. accounted for and reported like the operating losses of any other business.

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. capitalized only when purchased.

John Thomas has recently entered into an agreement with Longman Inc. Under this agreement, John will sell its products using the trade name of Longman in a specified geographical location. What type of intangible asset is this agreement between John Thomas and Longman Inc.? a. contract-related intangible assets b. artistic-related intangible assets c. marketing-related intangible assets d. customer-related intangible assets

a. contract-related intangible assets

The right granted to all authors, painters, musicians, sculptors, and other artists for their creations and expressions is termed as a a. copyright b. trademark c. patent d. franchise

a. copyright

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. salvage value.

When a patent is amortized, the credit is usually made to a. the Patents account. b. an Accumulated Amortization account. c. a Deferred Credit account. d. an expense account.

a. the Patents account.

85. Lynne Corporation acquired a patent on May 1, 2017. Lynne paid cash of $90,000 to the seller. Legal fees of $2,000 were paid related to the acquisition. What amount should be debited to the patent account? a. $2,000 b. $88,000 c. $90,000 d. $92,000

d. $92,000

98. A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2016 for $3,000,000. The company uses straight-line amortization for patents. On January 2, 2018, a new patent is received for a timed-release version of the same drug. The new patent has a legal and useful life of twenty years. The least amount of amortization that could be recorded in 2018 is a. $500,000. b. $100,000. c. $136,362. d. $115,000.

b. $100,000.

92. ELO Corporation purchased a patent for $135,000 on September 1, 2016. It had a useful life of 10 years. On January 1, 2018, ELO spent $33,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2018? a. $30,900. b. $30,000. c. $28,200. d. $23,400.

b. $30,000.

104. Dennis Company purchases Miles Company for $5,000,000 cash on January 1, 2018. The book value of Miles Company's net assets reported on its December 31, 2017 financial statement was $3,600,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. Determine the fair value of identifiable net assets used to record goodwill. a. $280,000. b. $4,520,000. c. $4,200,000. d. $3,600,000.

b. $4,520,000.

95. In January, 2013, Findley Corporation purchased a patent for a new consumer product for $960,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2018 the product was determined to be obsolete due to a competitors new product. What amount should Findley charge to expense during 2018, assuming amortization is recorded at the end of each year? a. $640,000. b. $480,000. c. $96,000. d. $64,000.

b. $480,000.

109. Twilight Corporation acquired End-of-the-World Products on January 1, 2017 for $6,400,000, and recorded goodwill of $1,200,000 as a result of that purchase. At December 31, 2018, the End-of-the-World Products Division had a fair value of $5,440,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $4,740,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2018? a. $ -0- b. $500,000 c. $460,000 d. $960,000

b. $500,000

110. Jenks Corporation acquired Linebrink Products on January 1, 2018 for $8,000,000, and recorded goodwill of $1,700,000 as a result of that purchase. At December 31, 2018, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2018? a. $ -0- b. $700,000 c. $500,000 d. $1,200,000

b. $700,000

96. Day Company purchased a patent on January 1, 2017 for $640,000. The patent had a remaining useful life of 10 years at that date. In January of 2018, Day successfully defends the patent at a cost of $288,000, extending the patent's life to 12/31/29. What amount of amortization expense would Day record in 2018? a. $64,000 b. $72,000 c. $77,000 d. $96,000

b. $72,000

93. Danks Corporation purchased a patent for $405,000 on September 1, 2016. It had a useful life of 10 years. On January 1, 2018, Danks spent $99,000 to successfully defend the patent in a lawsuit. Danks feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2018? a. $92,700. b. $90,000. c. $84,600. d. $70,200.

b. $90,000.

The notes to the financial statements should include information about acquired intangible assets, and aggregate amortization expense for how many succeeding years? a. 6 b. 5 c. 4 d. 3

b. 5

Which of the following types of intangible assets result from interactions and relationships with outside parties? a. Marketing-related intangible assets b. Customer-related intangible assets c. Contract-related intangible assets d. Artistic-related intangible assets

b. Customer-related intangible assets

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

b. Research and development costs

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

b. Straight-line

103. During 2018, Bond Company purchased the net assets of May Corporation for $2,200,000. On the date of the transaction, May had $600,000 of liabilities. The fair value of May's assets when acquired were as follows: Current assets $ 1,080,000 Noncurrent assets 2,520,000 $3,600,000 How should the $800,000 difference between the fair value of the net assets acquired ($3,000,000) and the cost ($2,200,000) be accounted for by Bond? a. The $800,000 difference should be credited to retained earnings. b. The $800,000 difference should be recognized as a gain. c. The current assets should be recorded at $1,080,000 and the noncurrent assets should be recorded at $1,720,000. d. A deferred credit of $800,000 should be set up and then amortized to income over a period not to exceed forty years.

b. The $800,000 difference should be recognized as a gain.

Which of the following does not describe intangible assets? a. They lack physical existence. b. They are financial instruments. c. They provide long-term benefits. d. They are classified as long-term assets.

b. They are financial instruments.

Which intangible assets are amortized? Limited-Life Indefinite-Life a. Yes Yes b. Yes No c. No Yes d. No No

b. Yes No

When the purchaser in a business combination pays less then the fair value of the identifiable net assets, such a situation is referred to as a: a. goodwill purchase. b. bargain purchase. c. residual purchase. d. blanket purchase.

b. bargain purchase.

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 fair value. c. fair value and the expected future net cash flows. d. book value and its fair value.

b. carrying amount and its fair value.

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.

b. depreciation deducted as part of research and development costs.

Goodwill a. represents the purchase price of a business that is about to be sold. b. is the difference between the fair value of the net tangible and identifiable intangible assets and the purchase price of the acquired business. c. generated internally should be capitalized in the year it occurs. d. 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.

b. is the difference between the fair value of the net tangible and identifiable intangible assets and the purchase price of the acquired business.

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.

b. limited-life or indefinite-life.

The carrying amount of an intangible is a. the fair value of the asset at a balance sheet date. b. the asset's acquisition cost less the total related amortization recorded to date. c. equal to the balance of the related accumulated amortization account. d. the assessed value of the asset for intangible tax purposes.

b. the asset's acquisition cost less the total related amortization recorded to date.

Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are) Recoverability Test Fair Value Test a. Yes Yes b. Yes No c No Yes d. No No

c No Yes

89. Jeff Corporation purchased a limited-life intangible asset for $375,000 on May 1, 2016. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2018? a. $ -0- b. $75,000 c. $100,000 d. $112,500

c. $100,000

87. Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.'s $5 par value common stock and $90,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.'s stock was selling at $7.50 per share. When Mini Corp. acquired the patent, its stock was selling for $9 a share. Mini Corp. should record the patent at what amount? a. $102,500 b. $108,750 c. $112,500 d. $90,000

c. $112,500

90. Rich Corporation purchased a limited-life intangible asset for $450,000 on May 1, 2016. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2018? a. $ -0-. b. $90,000 c. $120,000 d. $135,000

c. $120,000

99. Blue Sky Company's 12/31/18 balance sheet reports assets of $7,000,000 and liabilities of $2,800,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $420,000 greater than its book value. On 12/31/18, Horace Wimp Corporation paid $7,140,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase? a. $ -0- b. $140,000 c. $2,520,000 d. $2,940,000

c. $2,520,000

112. Hall Co. incurred research and development costs in 2018 as follows: Materials used in research and development projects $ 950,000 Equipment acquired that will have alternate future uses in future research and development projects 3,000,000 Depreciation for 2018 on above equipment 500,000 Personnel costs of persons involved in research and development projects 750,000 Consulting fees paid to outsiders for research and development projects 300,000 Indirect costs reasonably allocable to research and development projects 225,000 $5,725,000 The amount of research and development costs charged to Hall's 2018 income statement should be a. $2,000,000. b. $2,200,000. c. $2,725,000. d. $5,000,000.

c. $2,725,000.

105. Dennis Company purchases Miles Company for $4,200,000 cash on January 1, 2018. The book value of Miles Company's net assets reported on its December 31, 2017 financial statement was $3,600,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. What amount of gain or goodwill is recognized by Dennis? a. $920,000 gain. b. $600,000 goodwill. c. $320,000 gain. d. $320,000 goodwill.

c. $320,000 gain.

100. Dotel Company's 12/31/18 balance sheet reports assets of $12,000,000 and liabilities of $5,000,000. All of Dotel's assets' book values approximate their fair value, except for land, which has a fair value that is $800,000 greater than its book value. On 12/31/18, Egbert Corporation paid $12,200,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase? a. $ -0- b. $ 200,000 c. $4,400,000 d. $5,200,000

c. $4,400,000

111. Platteville Corporation has the following account balances at 12/31/18: Amortization expense $ 20,000 Goodwill 280,000 Patent, net of $60,000 amortization 160,000 What amount should Platteville report for intangible assets on the 12/31/18 balance sheet? a. $160,000 b. $220,000 c. $440,000 d. $460,000

c. $440,000

107. Harrel Company acquired a patent on an oil extraction technique on January 1, 2017 for $7,500,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $900,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $4,200,000. At what amount should the patent be carried on the December 31, 2018 balance sheet? a. $7,500,000 b. $7,200,000 c. $6,000,000 d. $4,200,000

c. $6,000,000

94. The general ledger of Vance Corporation as of December 31, 2018, includes the following accounts: Copyrights $ 50,000 Deposits with advertising agency (will be used to promote goodwill) 27,000 Discount on bonds payable 70,000 Excess of cost over fair value of identifiable net assets of Acquired subsidiary 480,000 Trademarks 90,000 In the preparation of Vance's balance sheet as of December 31, 2018, what should be reported as total intangible assets? a. $570,000. b. $597,000. c. $620,000. d. $647,000.

c. $620,000.

113. Loazia Inc. incurred the following costs during the year ended December 31, 2018: Laboratory research aimed at discovery of new knowledge $270,000 Costs of testing prototype and design modifications 75,000 Quality control during commercial production, including routine testing of products 270,000 Construction of research facilities having an estimated useful life of 6 years but no alternative future use 360,000 The total amount to be classified and expensed as research and development in 2018 is a. $675,000. b. $975,000. c. $705,000. d. $405,000.

c. $705,000.

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

c. Cost of marketing research for a new product

Which of the following is a contract-related intangible assets? a. Trademark b. Copyright c. Franchise d. Patent

c. Franchise

Which of the following intangible assets cannot be sold by a business to raise needed cash for a capital project? a. Patent. b. Copyright. c. Goodwill. d. Brand Name.

c. Goodwill.

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.

c. Long-lived.

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.

c. Perpetual franchises

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

c. Research and development costs.

Broadway Corporation was granted a patent on a product on January 1, 2007. To protect its patent, the corporation purchased on January 1, 2018 a patent on a competing product which was originally issued on January 10, 2014. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing the 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 2018.

c. amortized over a maximum period of 9 years.

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.

c. expensed as incurred.

In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as a. other assets. b. indirect costs. c. goodwill. d. direct costs.

c. goodwill.

Companies should test indefinite life intangible assets at least annually for a. recoverability. b. amortization. c. impairment. d. estimated useful life.

c. impairment.

Trademarks, newspaper mastheads, and internet domain names are all examples of a. contract-related intangible assets b. artistic-related intangible assets c. marketing-related intangible assets d. customer-related intangible assets

c. marketing-related intangible assets

Intangible assets are reported on the balance sheet a. with an accumulated depreciation account. b. in the property, plant, and equipment section. c. separately from other assets. d. None of these answer choices are correct.

c. separately from other assets.

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 Patents account. b. shown in the current income statement. c. shown as credits in the Patents account. d. reported as a contra property, plant and equipment item.

c. shown as credits in the Patents account.

108. Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2017 for $5,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $400,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom's market interest rate, is $2,400,000. At what amount should the patent be carried on the December 31, 2018 balance sheet? a. $5,000,000 b. $4,000,000 c. $3,200,000 d. $2,400,000

d. $2,400,000

88. Alonzo Co. acquires 3 patents from Shaq Corp. for a total of $280,000. The patents were carried on Shaq's books as follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000. When Alonzo acquired the patents their fair values were: Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000. At what amount should Alonzo record Patent BB? a. $93,333 b. $186,666 c. $2,000 d. $210,000

d. $210,000

101. Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2018. The book value of Haeger Company's net assets, as reflected on its December 31, 2017 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2017 indicates that the fair value of Haeger's tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? a. $ -0- b. $540,000 c. $360,000 d. $225,000

d. $225,000

86. Contreras Corporation acquired a patent on May 1, 2017. Contreras paid cash of $35,000 to the seller. Legal fees of $1,500 were paid related to the acquisition. What amount should be debited to the patent account? a. $1,500 b. $33,500 c. $35,000 d. $36,500

d. $36,500

116. In 2017, Edwards Corporation incurred research and development costs as follows: Materials and equipment $ 110,000 Personnel 130,000 Indirect costs 170,000 $ 410,000 These costs relate to a product that will be marketed in 2018. It is estimated that these costs will be recouped by December 31, 2020. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2017? a. $0. b. $280,000. c. $300,000. d. $410,000.

d. $410,000.

Which of the following research and development expenditures should be capitalized and depreciated? a. Engineering costs incurred to advance the new product to a production stage b. Cost of marketing research to promote a new product c. Material, labor, and overhead costs incurred in developing a new product d. Acquisition of machinery that can also be used for future R&D projects

d. Acquisition of machinery that can also be used for future R&D projects

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 brand name. b. A patent. c. A customer list. d. All of these answer choices are correct.

d. All of these answer choices are correct.

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 choices are included.

d. All of these choices are included.

Which of the following is often reported as part of operating expenses? a. Loss on sale of patent. b. Impairment losses for intangible assets other than goodwill. c. Impairment losses on goodwill. d. Amortization expense.

d. Amortization expense.

Which of the following would be considered research and development costs? 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.

d. Construction of prototypes.

Which of the following is not considered research and development costs? a. Planned search or critical investigation aimed at discovery of new knowledge. b. Translation of research findings or other knowledge into a plan or design for a new product or process. c. Translation of research findings or other knowledge into a significant improvement of an existing product. d. Cost of marketing research to promote a new product.

d. Cost of marketing research to promote a new product.

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.

d. Costs to successfully defend a patent.

Which of the following is not reported as part of continuing operations? a. Amortization expense. b. Impairment losses for intangible assets. c. Research and development costs. d. Goodwill.

d. Goodwill.

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

d. Immediate recognition as an expense

The recoverability test is used to determine any impairment loss on which of the following types of intangible assets? a. Indefinite life intangibles other than goodwill. b. Indefinite life intangibles. c. Goodwill. d. Limited life intangibles.

d. Limited life intangibles.

Which of the following is a type of technology-related intangible asset? a. Copyright b. Franchise c. License d. Patent

d. Patent

According to a Financial Accounting Standards Board Statement, how are research and development costs accounted for? a. They must be capitalized when incurred and then amortized over their estimated useful lives. b. They must be expensed in the period incurred. c. They may be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved. d. They 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.

d. They 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.

Which of the following is not reported under the "Other Expenses and Losses" section of the income statement? a. Goodwill impairment losses. b. Loss on sale of patent. c. Patent impairment losses. d. Trade name amortization expense.

d. Trade name amortization expense.

The cost of successfully defending a patent suit 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 product. d. amortized over the remaining estimated useful life of the patent.

d. amortized over the remaining estimated useful life of the patent.

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the corporation for the entity's entire life. 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.

d. expensed as incurred.

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

d. not be amortized.

Wriglee, Inc. went to court this year and successfully defended its patent from infringement 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.

d. patents and amortized over the remaining useful life of the patent.

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.

d. the amortization method used.