Intermediate II test 1

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

False

US GAAP allows for recovering a write down loss on a held for use long lived asset. TRUE OR FALSE

False

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

False limited life= event, recoverability, fair value Indefinite life= qualitative review, fair value (annually)

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

False- R&D is expensed not capitalized

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

False- the same recoverability test is use for limited life intangibles

Depletion is normally calculated using the straight-line method. TRUE OR FALSE

False- units of production

Are internally created intangible expensed or capitalized?

Generally expensed (only capitalize direct costs such as legal fees)

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

Limited Life intangibles

How do you calculate goodwill?

Purchase Price - Future value of net assets

How do you test indefinite life intangibles for impairment?

Qualitative review, Fair value test

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

What do you get when you get an intangible asset?

Rights and Privileges

The write off of value on a long lived asset is called

impairment

What is included in developmental costs?

intangible development such as cost to drill, tunnels, shafts, and wells

Natural resources include all of the following except: land improvements timber minerals petroleum

land improvements

When accumulated net income is less than dividends being paid then the dividends are called

liquidating dividends

Purchased Goodwill should

not be amortized

Full cost and successful efforts accounting are methods of accounting for

oil and gas industry

What are some types of intangible assets?

patents, copyrights, goodwill, trademarks

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

present value of expected future net cash flows.

What is included in acquisition costs?

price to obtain property to search, price for already discovered resources, lease for property with resources

Revise the depletion rate on a __________________ basis.

prospective

What is a bargain purchase?

purchase price less than the fair value of net assets acquired

What is included in restoration costs?

restoring the property to natural state or fair value asked for

What are examples or natural resources that are depleted?

timber, petroleum, minerals

Natural resources are also called

wasting assets

What is the recoverability test?

Book value (carrying amount) > Future net cash flows

How do you calculate the amount of impairment?

Book value - fair value

What are the 4 factors that go into a depletion base?

1) Acquisition cost 2) Exploration cost 3) Development cost 4) Restoration cost

What are the 6 categories of intangibles?

1) Market related (trademark) 2) Customer related (customer list) 3) Artistic related (copyright) 4) contract related (franchise) 5) Technology related (patent) 6) Goodwill

What are the two main features of natural resources?

1) complete removal/ consumption of asset 2) replacement of the asset only by act of nature

What are three typical costs of purchased intangibles?

1) purchase price 2) legal fees 3) incidental expenses

What is the fair value test?

Book value (carrying amount) > Fair value

What is successful efforts?

Capitalize on only the expenses incurred when oil or gas is successfully found

What is the journal entry to record Impairment for PPE?

Debit: Loss on Impairment Credit: Accumulated Depreciation

How do you test limited life intangibles for impairment?

Event, Recoverability test, Fair value test

When an impairment loss is found, what becomes the new carrying value?

The fair value

Internally generated goodwill should not be capitalized in the accounts TRUE OR FALSE

True

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 OR FALSE

True - you cant write up an asset held for use

The write off for a long lived asset is the amount that the carrying value exceeds its

fair value

What do liquidating dividends represent?

a return of capital

The total cost of natural resources includes all of the following except: exploration costs all of the options are included in the total cost restorations costs intangible development costs

all of the options are included in the total cost

What is depletion?

allocating the cost of natural resources

What does the purchaser of a bargain purchase record it?

as a gain

Where is an impairment loss reported?

as part of income from continuing operations in the "other expenses and losses" sections

How do you find future value of net assets?

assets- liabilites

How are purchased intangibles recorded?

at cost (includes all cost necessary to make the intangible asset ready for its intended use)

How do you calculate impairment of goodwill?

book value of the unit (including goodwill) - fair value of the unit

What is full cost accounting?

capitalize on all operating expenses while trying to locate oil and gas, whether you are successful or not

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

carrying amount and its fair value

What is included in exploration costs?

cost to explore land, when substantial capitalize into depletion base. Large companies expense at cost

How do you revise the depletion base?

divide the remaining cost by the new estimate of recoverable reserves

Depletion is a function of ____________ during the period.

extraction


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