Acc312_CH-12

Costs incurred internally to create intangibles are

c. expensed as incurred.

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)

Recoverability Test = No Fair Value Test = Yes

Which of the following intangible assets should not be amortized?

c. Perpetual franchises

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 allowed to be capitalized?

c. Research and development fees.

Which intangible assets are amortized?

Limited life = Yes Indefinite-Life = No

Internally generated goodwill should not be capitalized in the accounts.

True.

Which of the following intangible assets should be shown as a separate item on the balance sheet?

a. Goodwill

Which characteristic is not possessed by intangible assets?

a. Physical existence.

When developing computer software to be sold, which of the following costs should be capitalized?

d. None of the above.

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

d. Limited life intangibles.

The carrying amount of an intangible is

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

Research and development costs

b. may result in the development of a patent.

All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.

True.

If a new patent is acquired through modification of an existing patent, the remaining book value of the original patent may be amortized over the life of the new patent.

True.

If the fair value of an unlimited life intangible other than goodwill is less than its book value, an impairment loss must be recognized.

True.

Some intangible assets are not required to be amortized every year.

True.

One factor that is not considered in determining the useful life of an intangible asset is

a. salvage value.

When a patent is amortized, the credit is usually made to

a. the Patent account.

In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as:

c. goodwill.

Which of the following is considered research and development costs?

d. all of the above.

The cost of an intangible asset includes all of the following except

d.all of these are included.

In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.

True.

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

True.

The cost of acquiring a customer list from another company is recorded as an intangible asset.

True.

Which of the following would not be considered an R & D activity?

a. Adaptation of an existing capability to a particular requirement or customer's need.

Which of the following costs incurred internally to create an intangible asset is generally expensed?

a. Research and development costs.

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

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

Easton Company and Lofton Company were combined in a purchase transaction. Easton was able to acquire Lofton at a bargain price. The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. After revaluing non-current assets to zero, there was still some "negative goodwill." Proper accounting treatment by Easton is to report the amount as

a. a gain.

Operating losses incurred during the start-up years of a new business should be

a. accounted for and reported like the operating losses of any other business.

The intangible asset goodwill may be

a. capitalized only when purchased.

The notes to the financial statements should include information about acquired intangible assets, and aggregate amortization expense for how many succeeding years?

b. 5

Which of the following costs incurred with developing computer software for internal use should be capitalized?

b. Coding.

Which of the following is not an intangible asset?

b. Research and development costs

Which of the following methods of amortization is normally used for intangible assets?

b. Straight-line

Which of the following does not describe intangible assets?

b. They are financial instruments.

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

b. carrying amount and its fair value.

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

b. depreciation deducted as part of research and development costs.

The reason goodwill is sometimes referred to as a master valuation account is because

b. it is the difference between the fair market value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business.

Under current accounting practice, intangible assets are classified as

b. limited-life or indefinite-life.

Goodwill may be recorded when:

b. one company acquires another in a business combination.

Which of the following costs should be excluded from research and development expense?

c. Cost of marketing research for a new product

Which of the following intangible assets could not be sold by a business to raise needed cash for a capital project?

c. Goodwill.

Which of the following characteristics do intangible assets possess?

c. Long-lived.

Companies should test indefinite life intangible assets at least annually for:

c. impairment.

The total amount of patent cost amortized to date is usually

c. reflected as credits in the Patent account.

Intangible assets are reported on the balance sheet

c. separately from other assets.

Capitalized costs incurred to develop internal use computer software should be amortized using the:

c. straight-line approach..

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?

d. All of the above.

Which of the following is considered research and development costs?

d. Both a and b.

Which of the following would be considered research and development?

d. Construction of prototypes.

Which of the following costs should be capitalized in the year incurred?

d. Costs to successfully defend a patent.

Which of the following principles best describes the current method of accounting for research and development costs?

d. Immediate recognition as an expense

How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?

d. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.

Which of the following is often reported as an extraordinary item?

d. None of the above.

Which of the following should be reported under the "Other Expenses and Losses" section of the income statement?

d. None of the above.

The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be

d. amortized over the remaining estimated life of the original patent covering the product whose market would have been impaired by competition from the newly patented product.

The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the corporation for the entity's entire life. These costs should be

d. expensed as incurred.

Capitalized costs incurred while developing computer software to be sold should be amortized using the:

d. higher of the straight-line method or the percent-of-revenue method.

Purchased goodwill should

d. not be amortized.

Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to

d. patents and amortized over the remaining useful life of the patent.

Factors considered in determining an intangible asset's useful life include all of the following except

d. the amortization method used.