CFAS - CHAPTER 20

a

All of the following expenditures shall be expensed, except a. Payment in advance of delivery of goods b. Business relocation or reorganization cost c. Start up cost d. advertising and promotion cost

a

An activity that would be expensed currently as research and development is a. Testing in search for product or process alternative b. Engineering follow-through in an early phase of commercial production c. Adaptation of an existing capability to a particular requirement or customer need as a part of continuing commercial activity d. Legal work in connection with patent application and the licensing of patent

c

An entity that acquired an intangible asset may use the revaluation model for subsequent measurement only when a. The useful life of the intangible asset can be reliably determined b. The intangible asset is a monetary asset c. An active market exists for the intangible asset d. The cost of the intangible asset can be measured reliably

c

An intangible asset is identifiable when a. It is separable b. It is neither separable nor it arises from contractual and other legal right c. It is either separable or it arises from contractual and other legal right d. It arises from contractual and other legal right

c

An intangible asset is regarded as having an indefinite useful life when a. The useful life of the intangible asset arises from legal right b. There is foreseeable limit to the period over which the asset is expected to generate net cash inflows to the entity c. There is no foreseeable limit to the period over which the asset is expected to generate net cash inflows to the entity d. The useful life of the intangible asset arises from contractual right

b

Which best describes the accounting for R and D cost? a. Income tax minimization b. Immediate recognition as an expense c. Systematic and rational allocation d. Associating cause and effect

b

Which condition must be met for an item to be recognized as an intangible asset other than goodwill? a. The item is expected to be used in the production or supply of goods or services b. The item is nonmonetary, identifiable and lacks physical substance c. The item is part of an activity aimed at gaining new scientific or technical knowledge d. The fair value can be measured reliably

b

Which disclosure is not required with respect to intangible assets? a. Contractual commitment for the acquisition of intangible asset b. Fair value of similar intangible asset used by the competitor. c. useful life of the intangible asset d. reconciliation of carrying amount at the beginning and end of the year

b

Which does not qualify as an intangible asset? a. Computer software b. Notebook computer c. Registered patent d. Copyright

d

Amortization of an intangible asset with a finite useful life shall commence when a. The cost can be identified with reasonable certainty b. It is probable that it will generate economic benefit c. It is first recognized as an asset d. It is available for the intended use

b

"Web site development cost" should be a. Recognized as an intangible asset with indefinite life. b. Expensed when incurred. c. Charged to retained earnings. d. Recognized as an intangible asset with finite life.

c

A research and development activity for which the cost would be expensed as incurred is a. Adaptation of an existing capability to a particular requirement of customer need b. Quality control during commercial production c. Design, construction and testing of preproduction prototype or model d. Periodic design changes to existing product

b

After initial recognition, an intangible asset shall be measured using a. Cost model ore fair value model b. Cost model or revaluation model c. Revaluation model d. Cost model

c

An intangible asset shall be recognized if a. It is probable that future economic benefits attributable to the asset will flow to the entity b. The cost of the intangible asset can be measured reliably c. It is probable that future economic benefits attributable to the asset will flow to the entity and the cost of the intangible asset can be measured reliably d. It is possible that future economic benefits attributable to the asset will flow to the entity and the cost of the intangible asset can be measured reliably

b

At the beginning of current year, an entity purchased equipment for use in developing a new product. The entity used the straight-line depreciation method. The equipment could provide benefits over a 10-year period. However, the new product development is expected to take five years and the equipment can be used only for this project. The expense for the current year in relation to the equipment equals a. Zero b. The total cost of the equipment c. One-fifth of the cost of the equipment d. One-tenth of the cost of the equipment

b

Development activities include all of the following, except a. Design of tools, jigs, molds and dies involving new technology b. Laboratory activities aimed at obtaining new knowledge c. Design, construction and testing of a chosen alternative for a new improved product or process d. Design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production

b

Directly attributable cost of preparing the intangible asset for the intended use include all of the following, except a. Cost of employee benefit arising directly from bringing the asset to the working condition b. Initial operating loss c. Cost of testing whether the asset is functioning properly d. Professional fee arising directly from bringing the asset to the working condition

b

Factors in determining the useful life of an intangible asset included all of the following, except a. Any legal or contractual provision b. The amortization method c. The expected use of the asset d. Any provision for renewal or extension of the legal life

b

How should research and development costs be accounted for? a. Either capitalized or expensed when incurred depending upon the materiality b. Expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future use or unless contractually reimbursable c. Capitalized when incurred and amortized over the useful life d. Expensed in the period incurred

b

If an entity 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. An expense at such time as productive research has been obtained from the facility. b. Depreciation deducted as part of research and development expense. c. Research and development expense in the period of construction. d. Depreciation or immediate write off depending on policy.

b

Intangible assets are classified as a. Amortizable and unamortizable b. Limited life and indefinite life c. Legally restricted and goodwill type d. Specifically identifiable and goodwill type

a

Intangible assets are reported a. As a separate line item b. All of these are allowed c. Under property, plant and equipment d. With an accumulated amortization account

b

Intangible assets with indefinite useful life are tested for impairment a. Biannually b. Annually c. There is no definite guideline for impairment d. Quarterly

a

Once recognized, intangible assets can be carried at a. cost less accumulated amortization and impairment losses b. revalued amount less accumulated depreciation c. Cost plus a notional increase in fair value since the intangible asset is acquired. d. cost less accumulated amortization

b

One factor that is not considered in determining the useful life of an intangible asset is a. Provision for renewal or extension b. Residual value c. Expected action of competitors d. Legal life

a

Operating loss incurred during the start-up years of a new entity should be a. Accounted for like any other operating loss b. Written off directly against retained earnings c. Capitalized as an intangible asset and amortized over twenty years d. Capitalized and amortized over five years

b

Research activities include all of the following, except a. Search for product or process alternative b. Design, construction and testing of preproduction prototype and model c. Search for application of research finding or other knowledge d. Formulation and design of the possible product or process alternative

c

The cost of a separately acquired intangible asset comprises the purchase price and a. Cost of introducing a new product or service b. Administration and other general overhead cost c. Directly attributable cost of preparing the asset for the intended use d. Cost of conducting a business in a new location

d

The cost of an internally generated asset includes all of the following, except a. Fee to register a legal right b. Compensation costs of personnel directly engaged in generating the asset c. Cost of materials and services used in generating the intangible asset d. Expenditure on training staff to operate the asset

b

The major problem for an intangible asset is determining a. Separability b. Useful life c. Residual value d. Fair value

d

The proper accounting for costs incurred in creating computer software is a. To capitalize all costs until the software is sold. b. To capitalize all costs incurred until a detailed program design or working model is created. c. To charge research and development expense only if the computer software has alternative future use. d. To charge research and development expense when incurred until technological feasibility has been established for the product.

b

The recognition criteria for an intangible asset include which of the following conditions? a. The cost can be measured reliably b. It is probable that future economic benefit will arise from use and the cost can be measured reliably c. It is probable that future economic benefit will arise from use d. The intangible asset must be measured at cost

c

The residual value of an intangible asset with a finite useful life shall be assumed zero, except a. When there is a commitment by a third party to party to purchase the asset at the end of the useful life b. When there is an active market for the asset c. When there is a commitment by a third party to purchase the asset at the end of useful life or there is an active market will exist at the end of useful life d. There are no exceptions

b

What is the method of amortizing intangible asset? a. The double declining balance in all circumstances b. The straight line method, unless the pattern of the economic benefits can be determined reliably c. The straight line method in all circumstances d. A subjective amount of periodic amortization

a

Which Is a research and development cost? a. Development or improvement of technique and process b. Offshore oil exploration that is the primary activity c. Market research related to a major product d. Research and development performed under contract for others

c

Which is an example of an activity that would be excluded from research and development costs? a. Design, construction and testing of preproduction prototype or model b. Laboratory research aimed at discovery of new knowledge c. Quality control during commercial production d. Testing in search for product or process alternative

c

Which is not a consideration in determining the useful life of an intangible asset? a. Provision for renewal or extension b. Obsolescence c. Initial cost d. Legal, regulatory or contractual provision

c

Which of the following cost should be excluded from research and development expense? a. Modification of the design of a product b. Acquisition of research and development equipment for use on a current project only c. Cost of marketing research for new product d. Cost of marketing research for new product

b

Which of the following costs should be capitalized? a. Acquisition cost of equipment to be used on current research project only b. Engineering cost incurred to advance the product to the full production stage c. Salaries of research staff d. Cost of research to determine whether a market for the product exists

d

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

d

Which of the following costs should not be capitalized? a. Acquisition cost of equipment to be used on current and future research project b. Cost incurred to file for patent c. Engineering cost incurred to advance the product to the full production stage d. Cost of testing prototype before economic feasibility has been demonstrated

d

Which of the following is not one of the criteria which must be met before development costs can be capitalized? a. The entity has sufficient financial resources to complete the project b. The project has achieved technical feasibility c. The entity intends to complete the project and either use or sell the intangible asset d. The entity can reliably identify the research costs incurred to bring the project to economic feasibility

a

Which of the following research and development costs should be capitalized and amortized over current and future periods? a. Research and development general laboratory building b. Administrative salaries allocated to research and development c. Research findings purchases from another entity to aid a particular research project currently in process d. Inventory used for a specific research project

a

Which of the following should not be considered research and development activity? a. Adaptation of an existing capability to a particular requirement or customer need b. Conceptual formulation and design of possible product alternative c. Laboratory research aimed at discovery of new knowledge d. Application of research finding or other knowledge to a plan for a new product

d

Which of the following would be considered research and development? a. Marketing research to promote a new product b. Routine effort to refine an existing product c. Periodic alternation to existing production line d. Construction of prototype

d

Which of the following would qualify as an intangible asset? a. Operating loss during the initial stage of the project b. Tuition fee paid to employees who decide to enroll in an M.B.A program while working with the entity c. Advertising and promotion d. Legal cost paid to lawyers to register a patent

d

Which research and development costs should be capitalized and amortized over current and future periods? a. Research findings purchased from another entity to aid a particular research project currently in process b. Labor and material costs incurred in constructing a prototype or model c. Administrative salaries allocated to research d. Cost of testing equipment that will also be used in another research and development project

c

Which statement in relation to R and D is incorrect? a. Expenditure during the development phase of a project may sometimes be capitalized. b. Development involves the application of research finding c. The project being developed should have already been put into commercial production. d. Expenditure during the research phase of a project cannot be capitalized as an intangible asset.

b

Which statement is incorrect regarding internal use software? a. The costs of testing and installing computer hardware should be capitalized when incurred b. The costs of training and application maintenance should expensed when incurred c. The application and development costs should be amortized on the straight-line basis unless another systemic and rational is more appropriate. d. Internal use software is considered to be software that is marketed as a separate product.

d

Which statement is the most accurate about R and D? a. Training costs during research can be capitalized. b. Design of jigs and tools would qualify as research. c. Costs during the research phase can be capitalized. d. Costs incurred during the development phase can be capitalized if certain criteria are met.

c

Which statement is true about development cost? a. Development cost is always deferred and expensed against future revenue b. Development cost is recorded as component of other comprehensive income c. Development cost may be capitalized as an intangible asset in very restrictive situations d. Development cost must be expensed

a

Which statement is true concerning amortization and impairment of intangible assets? a. All of these statements are true b. Intangible asset with finite useful life are amortized over the useful life c. Intangible assets with indefinite useful life are not amortized but are tested for impairment at least annually d. Intangible assets with finite useful life are tested for impairment at the end of reporting period when there is an indication of impairment

d

Which statement is true concerning separate acquisitions of an intangible asset? a. If an intangible asset is acquired separately, the cost of the intangible asset can usually be measured reliably. b. If payment for an intangible asset is deferred beyond normal credit terms, the cost is equal to the cash price c. The cost of a separately acquired intangible asset comprises the purchase price and any directly attributable cost of preparing the assets for the intended use d. All of the given statements are true

b

Which statement is true in relation to control by the entity of the intangible asset? a. The skill of employees arising out of the benefits of training costs cannot be recognized as intangible asset b. All of these statements are true c. Market share and customer loyalty cannot normally be recognized as intangible asset because an entity cannot control the action of customers d.The capacity of the entity to control the economic benefits from an intangible asset would normally stem from legal rights that are enforceable in a court of law.

a

Which statement is true in relation to internally generated intangible asset? a. All of these statements are true b. Internally generated brand, masthead, publishing title, and customer list shall not be recognized as an intangible asset c. The cost of internally generated intangible asset comprises all directly attributable costs necessary to produce and prepare the asset for the intended use d. Internally generated goodwill shall not be recognized as an intangible asset