Chapter 12

Oriole Co. acquires 3 patents from Pharoah Corp. for a total of $228000. The patents were carried on Pharoah's books as follows: Patent AA: $3700; Patent BB: $2200; and Patent CC: $3200. When Oriole acquired the patents their fair values were: Patent AA: $25000; Patent BB: $220000; and Patent CC: $75000. At what amount should Oriole record Patent BB? $2200 $156750 $76000 $152000

$156750

Pharoah Corporation acquired a patent on May 1, 2020. Pharoah paid cash of $39000 to the seller. Legal fees of $2350 were paid related to the acquisition. What amount should be debited to the patent account? $39000 $41350 $2350 $36650

$41350

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

All of these answer choices are correct.

Which of the following would be considered research and development costs? Marketing research to promote a new product. Construction of prototypes. Periodic alterations to existing production lines. Routine efforts to refine an existing product.

Construction of prototypes.

Which of the following costs should be excluded from research and development expense? Engineering activity required to advance the design of a product to the manufacturing stage Modification of the design of a product Cost of marketing research for a new product Acquisition of R & D equipment for use on a current project only

Cost of marketing research for a new product

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

Goodwill.

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

Goodwill.

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? Attorney fees. Design costs. Research and development costs. Consulting fees.

Research and development costs.

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

Trade name amortization expense.

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 amortized over a maximum period of 20 years. amortized over a maximum period of 16 years. expensed in 2018. amortized over a maximum period of 9 years.

amortized over a maximum period of 9 years.

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: goodwill purchase. bargain purchase. residual purchase. blanket purchase.

bargain purchase.

The cost of successfully defending a patent suit should be added to factory overhead and allocated to production of the product. capitalized and amortized over the remaining estimated useful life of the patent. charged off in the current period. capitalized and amortized over the legal life of the purchased patent.

capitalized and amortized over the legal life of the purchased patent.

The intangible asset goodwill may be capitalized only when purchased. capitalized either when purchased or created internally. capitalized only when created internally. written off directly to retained earnings.

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.? marketing-related intangible assets customer-related intangible assets contract-related intangible assets artistic-related intangible assets

contract-related intangible assets

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 depreciation or immediate write-off depending on company policy. an expense at such time as productive research and development has been obtained from the facility. research and development expense in the period(s) of construction. depreciation expensed as part of research and development costs.

depreciation expensed as part of research and development costs.

One factor that is not considered in determining the useful life of an intangible asset is salvage value. provisions for renewal or extension. legal life. expected actions of competitors.

salvage value.

The total amount of patent cost amortized to date is usually shown in the current income statement. shown as credits in the Patents account. reported as a contra property, plant and equipment item. shown in a separate Accumulated Patent Amortization account which is shown contra to the Patents account.

shown as credits in the Patents account.

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

marketing-related intangible assets

Factors considered in determining an intangible asset's useful life include all of the following except the amortization method used. the expected use of the asset. any provisions for renewal or extension of the asset's legal life. any legal or contractual provisions that may limit the useful life

the amortization method used.

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

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