Intermediate Accounting 2

A company can write up or write down an asset held for disposal in future periods as long as the carrying value after the write-up does not exceed the carrying amount before the impairment.

True

Goodwill is only recorded when it is ______

Purchased

How do you change the estimate of recoverable reserves?

Remaining reserves/New estimates of reserves

The process of allocating the cost of natural resources is called

Depletion

Natural resources include all of the following except:

land improvements.

Impairment testing is performed in the same way for indefinite-life intangibles and limited-life intangibles.

False

Periodic alterations to existing products are an example of research and development costs.

False

Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.

False

Tangible costs, such as heavy equipment, are normally included in the depletion base.

False

The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.

False

When accumulated net income (RE) is greater than dividends being paid then the dividends are called liquidating dividends.

False, Dividend > RE

The cost incurred to find a natural resource is called a development cost.

False, Exploration

One class of intangibles is called permanent life intangibles

False, Indefinite-Life

Assets that derive their value from rights and privileges granted to the company are called physical assets.

False, Intangible Assets

The fair value test identifies the need for an impairment write-off.

False, Recoverability test

Full-Cost and successful-efforts accounting are methods of accounting are methods of accounting for timber operations

False, oil and gas

Impairment write-offs can be recovered on assets held for use

False, only assets held for disposal one recovered amount of impairment

Current assets should only evaluated for impairment

False, only long-lived assets

Goodwill should be amortized each year

Fasle

The allocation of ______ ______ is called amortization.

Intangible Assets

The recoverability test is used to determine any impairment loss on which of the following types of intangible assets?

Limited life intangibles.

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

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

Purchased goodwill should

not be amortized.

Bargain Purchase

-purchase price less than the fair value of net assets acquired -amount is recorded as a gain by the purchaser

The total cost of natural resources includes all of the following except:

All of the options are included in the total cost.

Depletion is normally calculated using the straight-line method.

False

Goodwill impairment testing is a two-step process

False

Goodwill represents the assets that can be individually identified and recognized.

False

A patent is a type of intangible

True

Acquisition costs are usually recorded in an account titled Undeveloped Property

True

Generally, all costs related to internally created intangibles is expensed in the current period

True

Internally generated goodwill should not be capitalized in the accounts.

True

Research and development costs can be capitalized if they have a future use

True

Those who support the full-cost concept argue that the cost of drilling a dry hole is a cost needed to find the commercially profitable wells.

True

IFRS does not allow the use of the recoverability test

True, IFRS goes straight to the FV test

A loss on impairment of an intangible asset is the difference between the asset's

carrying amount and its fair value.

An asset impairment occurs when the asset's carrying amount exceeds the:

expected future net cash flows.