Chapter 12 Multiple Choice

The impairment rule for goodwill involves how many steps?

2

Do you amortize the costs of goodwill from a business combination accounted for as a purchase or the costs of developing goodwill internally

No, you don't amortize goodwill

The cost of a purchased intangible asset includes a. all of these answer choices are correct. b. legal fees. c. purchase price. d. incidental expenses.

a. all of these answer choices are correct.

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

Which of the following is a factor to be considered in determining a limited-life intangible asset's useful life? a. The effects of obsolescence. b. All of these answer choices are correct. c. Any legal provisions that may limit the useful life. d. The expected useful life of another asset or group of assets to which the useful life of the intangible asset may relate.

b. All of these answer choices are correct.

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): a. Recoverability Test Yes Fair Value Test No b. Recoverability Test No Fair Value Test Yes c. Recoverability Test No Fair Value Test No d. Recoverability Test Yes Fair Value Test Yes

b. Recoverability Test No Fair Value Test Yes

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 c. Double-declining-balance

b. Straight-line

For indefinite-life intangibles other than goodwill, an impairment test should be conducted at least: a. monthly. b. annually. c. once during its useful life. d. quarterly.

b. annually

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

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.

Marketing-related intangibles would include a. a customer list. b. a franchise. c. a trade name. d. a copyright.

c. a trade name.

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.

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

c. impairment.

Which of the following is not a characteristic of intangible assets? a. They lack physical existence. b. They are not financial instruments. c. They are long-term in nature. d. They are all subject to amortization.

d. They are all subject to amortization.

Which of the following would not be amortized? a. Customer List. b. Patent. c. Copyright. d. Trade name.

d. Trade name.

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.