Module 2
What is true regarding a purchased limited-life intangible asset?
It is amortized; tested for recoverability test, and fair value tested.
How is the total amount of patent cost amortized to date usually reported on the balance sheet?
It is shown as credits in the Patents account and not in a contra account.
What is amortization?
Process of allocating cost of an intangible asset over useful life in a systematic and rational manner. Indefinite life is not amortized. Limited life intangibles are amortized.
Which principle best describes the current method of accounting for research and development costs?
Immediate recognition as an expense
What would marketing-related intangibles include?
A trade name
Which cost should be capitalized in the year incurred?
Acquiring a trademark
The notes to the financial statements should include information about acquired intangible assets, and aggregate amortization expense for how many succeeding years?
5
What is a federally granted right?
Copyright
Which research and development costs may be capitalized?
Costs for assets with alternative future uses
Which piece of information is included in the presentation of intangible assets in the financial statements?
Crediting amortization directly to the intangible asset account
If a company constructs a laboratory building to be used as a research and development facility, what would the cost of the laboratory building be matched against earnings as?
Depreciation expensed as part of research and development costs
In a business combination, companies record identifiable intangible assets that they can reliably measure. What are all other intangible assets, too difficult to identify or measure, recorded as?
Goodwill
On which type of intangible assets is the recoverability test used to determine any impairment loss?
Limited life intangibles
Which characteristic do intangible assets possess?
Long-lived
What is a bargin purchase?
Occurs when the fair market value of the assets acquired is higher than the purchase price of the assets.
A company's accountant makes a year-end adjusting entry to account for the amortization of a patent. Which account is credited to recognize this journal entry?
Patent
What are intangible assets?
Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.
What is impairment?
The carrying amount of a long-lived asset (property, plant, and equipment or intangible asset) is not recoverable.
What is Goodwill?
The excess of the cost of the purchase over the fair value of the identifiable net assets (assets less liabilities) purchased.
How are costs incurred internally to create intangibles treated?
They are expensed as incurred.
Which item is considered to be a technology-related intangible asset?
Trade secrets
What are development activities?
Translation of research findings or other knowledge into a plan or design for a new product/process.
What is carrying amount?
cost of asset - accumulated depreciation
What are research activities?
planned search or critical investigation aimed at discovery of new knowledge