ACC 350 (Ch. 12: Intangibles)

Development costs related to computer software that is to be sold, leased, or otherwise marketed should e accounted for in which of the following ways? A. all software development costs should be recorded as R&D expense until technological feasibility is established B. all software development costs should be capitalized C. all software development costs should be recorded in R&D expense until the product is available for general release to customers D. all software development costs should be recorded as R&D expense

A

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 fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost of acquiring Easton. Easton will report the excess amount as a. a gain. b. part of current income in the year of combination. c. a deferred credit and amortize it. d. paid-in capital.

A

If research and development cost has alternative future uses, then the company A. follows normal accrual procedure B. adds the cost to inventory C. expenses the cost in the period incurred D. adds the cost to property, plant, and equipment

A

John Thomas has recently entered into an agreement with Longman Inc. Under this agreement, John will sell its products using the trade name of Longman in a specified geographical location. What type of intangible asset is this agreement between John Thomas and Longman Inc.? a. contract-related intangible assets b. artistic-related intangible assets c. marketing-related intangible assets d. customer-related intangible assets

A

One factor that is not considered in determining the useful life of an intangible asset is a. salvage value. b. provisions for renewal or extension. c. legal life. d. expected actions of competitors.

A

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. b. written off directly against retained earnings. c. capitalized as a deferred charge and amortized over five years. d. capitalized as an intangible asset and amortized over a period not to exceed 20 years.

A

Technological feasibility of software products is established when A. a detailed program design is completed B. the product is ready for general release C. the application to patent the technology is filed with the federal government D. the designing, coding, and testing is to be sold or licensed to third parties

A

The cost of a copyright should A. be amortized over a period not to exceed its economic life B. be amortized over a period not to exceed 20 years, unless the right is renewed C. be amortized over a period not to exceed the life of the author plus 50 years D. not be amortized and the cost should be capitalized as an asset with indefinite life

A

The cost of an internally developed unidentifiable intangible is expensed as incurred. Accordingly, which one of the following costs would be expensed in the year inccured? A. costs of developing knowledge and skill levels for new management-level employees B. cost of improvements with a three-year life made to an asset that is being leased by the company for a five-year period C. costs of developing new software products with proven technological feasiblility D. legal cost of obtaining a patent

A

The intangible asset goodwill may be a. capitalized only when purchased. b. capitalized either when purchased or created internally. c. capitalized only when created internally. d. written off directly to retained earnings.

A

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

When a patent is amortized, the credit is usually made to a. the Patents account. b. an Accumulated Amortization account. c. a Deferred Credit account. d. an expense account.

A

Which of the following costs incurred internally to create an intangible asset is generally expensed? a. Research and development costs. b. Filing costs. c. Legal costs. d. All of these answer choices are correct.

A

Which of the following costs should always be expensed as incurred? A. the costs of internally developed unidentifiable intangible assets B. the costs of externally acquired unidentifiable intangible assets C. the costs of externally acquired identifiable intangible assets D. the costs incurred directly associated with establishing and successfully defending the right associated with internally developed identifiable intangible assets

A

Which of the following groups would be classified as intangible assets for financial accounting and reporting purposes? A. patents, software development costs, franchises, copyrights, and trademarks B. start-up costs, goodwill, costs of employee training programs, and trademarks C. computer software costs, development costs for internally developed patents, research, and goodwill D. long-term notes receivable, copy rights, goodwill, and trademarks

A

Which of the following intangible assets should be shown as a separate item on the balance sheet? a. Goodwill b. Franchise c. Patent d. Trademark

A

Which of the following is considered research and development costs? a. Planned search or critical investigation aimed at discovery of new knowledge. b. Research costs incurred under contract with another company. c. Commissions to sales staff marketing a new product. d. Cost of marketing research to promote a new product.

A

Which of the following methods is commonly used to amortize intangible assets over their useful lives? A. straight line B. annual review for impairment C. declining balance D. none of these methods are correct, since intangible assets are not amortized

A

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 b. Inventory used for a specific research project c. Administrative salaries allocated to research and development d. Research findings purchased from another company to aid a particular research project currently in process

A

Which of the following sets represents a FALSE relationship regarding the accounting for the cost of intangibles according to GAAP? Set Category Account for cost by I. Purchased identifiable intangibles Capitalize costs II. Purchased unidentifiable intangibles Capitalize costs III. Internally developed identifiable intangibles Capitalize costs IV. Internally developed unidentifiable intangibles Expense costs A. Set III B. Set IV C. Set I D. Set II

A

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. b. Searching for applications of new research findings. c. Laboratory research aimed at discovery of new knowledge. d. Conceptual formulation and design of possible product or process alternatives.

A

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

Costs for which of the following activities should NOT be included in research and development? A. design of tools, jigs, molds, and dies involving new technology B. trouble-shooting in connection with breakdowns during commercial producition C. design, construction, and testing of preproduction prototypes and models D. modification of the formulation or design of a product or process

B

GAAP requires that research and development costs must be A. expensed in part and capitalized in part B. expensed as incurred C. accumulated until the existence of future benefits is determined D. capitalized

B

Goodwill a. represents the purchase price of a business that is about to be sold. b. is the difference between the fair value of the net tangible and identifiable intangible assets and the purchase price of the acquired business. c. generated internally should be capitalized in the year it occurs. d. is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

B

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

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 a. research and development expense in the period(s) of construction. b. depreciation deducted as part of research and development costs. c. depreciation or immediate write-off depending on company policy. d. an expense at such time as productive research and development has been obtained from the facility.

B

Research and development costs a. are intangible assets. b. may result in the development of a patent. c. are easily identified with specific projects. d. All of these answer choices are correct.

B

The carrying amount of an intangible is a. the fair value of the asset at a balance sheet date. b. the asset's acquisition cost less the total related amortization recorded to date. c. equal to the balance of the related accumulated amortization account. d. the assessed value of the asset for intangible tax purposes.

B

The notes to the financial statements should include information about acquired intangible assets, and aggregate amortization expense for how many succeeding years? a. 6 b. 5 c. 4 d. 3

B

Under current accounting practice, intangible assets are classified as a. amortizable or unamortizable. b. limited-life or indefinite-life. c. specifically identifiable or goodwill-type. d. legally restricted or goodwill-type.

B

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

Which intangible assets are amortized? a. limited life - yes indefinite life - yes b. limited life - yes indefinite life - no c. limited life - no indefinite life - yes d. limited life - no indefinite life - no

B

Which of the following characteristics is NOT common to both tangible and intangible asset? A. held for use and not for investment B. may have value only to a particular company C. have an expected life of more than one year D. derive value from the ability to generate revenue

B

Which of the following is not an intangible asset? a. Trade name b. Research and development costs c. Franchise d. Copyrights

B

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 d. Double-declining-balance

B

Which of the following types of intangible assets result from interactions and relationships with outside parties? a. Marketing-related intangible assets b. Customer-related intangible assets c. Contract-related intangible assets d. Artistic-related intangible assets

B

_____ occurs when the fair value of an asset is less than its carrying value. A. goodwill B. impairment C. amortization D. unidentification

B

Broadway Corporation was granted a patent on a product on January 1, 2007. To protect its patent, the corporation purchased on January 1, 2018 a patent on a competing product which was originally issued on January 10, 2014. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing the product. The cost of the competing patent should be a. amortized over a maximum period of 20 years. b. amortized over a maximum period of 16 years. c. amortized over a maximum period of 9 years. d. expensed in 2018.

C

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 - yes b. recoverability test - yes fair value test - no c. recoverability test - no fair value test - yes d. recoverability test - no fair value test - no

C

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

C

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

Factors considered in determining an intangible asset's useful life include all of the following except a. the expected use of the asset. b. any legal or contractual provisions that may limit the useful life. c. any provisions for renewal or extension of the asset's legal life. d. the amortization method used.

C

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 a. other assets. b. indirect costs. c. goodwill. d. direct costs.

C

Intangible assets are initially recorded at A. present value B. fair value C. cost D. expected future value

C

Intangible assets are reported on the balance sheet a. with an accumulated depreciation account. b. in the property, plant, and equipment section. c. separately from other assets. d. None of these answer choices are correct.

C

Related to in-process R&D, an acquiring company may NOT A. establish a patent for in-process R&D B. capitalize in-process R&D C. increase the amount of goodwill for in-process R&D D. treat in-process R&D as an intangible asset

C

The allocation of the cost of intangible assets in a systematic manner over the asset's useful life is called A. depreciation B. impairment C. amortization D. systemization

C

The total amount of patent cost amortized to date is usually a. shown in a separate Accumulated Patent Amortization account which is shown contra to the Patents account. b. shown in the current income statement. c. shown as credits in the Patents account. d. reported as a contra property, plant and equipment item.

C

Trademarks, newspaper mastheads, and internet domain names are all examples of a. contract-related intangible assets b. artistic-related intangible assets c. marketing-related intangible assets d. customer-related intangible assets

C

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 capitalized? a. Attorney fees. b. Consulting fees. c. Research and development costs. d. Design costs.

C

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

C

Which of the following intangible assets cannot be sold by a business to raise needed cash for a capital project? a. Patent. b. Copyright. c. Goodwill. d. Brand Name.

C

Which of the following intangible assets should not be amortized? a. Copyrights b. Customer lists c. Perpetual franchises d. All of these intangible assets should be amortized.

C

Which of the following is a contract-related intangible assets? a. Trademark b. Copyright c. Franchise d. Patent

C

Which of the following is an intangible asset that is NOT typically amortized? A. patent B. franchise C. goodwill D. copyright

C

_____ CANNOT be separated from the entity and sold, transferred, licensed, rented, or exchanged. A. internally developed identifiable intangible asset B. purchased identifiable intangible asset C. unidentifiable intangible asset D. tangible asset

C

_____ are contractual agreements which grant the right to perform certain functions or sell certain products or services A. customer acquisition lists B. trademarks C. franchises D. noncompete agreements

C

According to a Financial Accounting Standards Board Statement, how are research and development costs accounted for? a. They must be capitalized when incurred and then amortized over their estimated useful lives. b. They must be expensed in the period incurred. c. They may be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved. d. They 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.

D

Identifiable intangible assets would include all of the following EXCEPT A. franchises B. patents C. trademarks D. goodwill

D

Purchased goodwill should a. be written off as soon as possible against retained earnings. b. be written off as soon as possible as an extraordinary item. c. be written off by systematic charges as a regular operating expense over the period benefited. d. not be amortized.

D

The cost of an intangible asset includes all of the following except a. purchase price. b. legal fees. c. other incidental expenses. d. All of these choices are included.

D

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

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 a. capitalized and never amortized. b. capitalized and amortized over 40 years. c. capitalized and amortized over 5 years. d. expensed as incurred.

D

The recoverability test is used to determine any impairment loss on which of the following types of intangible assets? a. Indefinite life intangibles other than goodwill. b. Indefinite life intangibles. c. Goodwill. d. Limited life intangibles.

D

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? a. A brand name. b. A patent. c. A customer list. d. All of these answer choices are correct.

D

Which of the following costs should be capitalized in the year incurred? a. Research and development costs. b. Costs to internally generate goodwill. c. Organizational costs. d. Costs to successfully defend a patent.

D

Which of the following is a type of technology-related intangible asset? a. Copyright b. Franchise c. License d. Patent

D

Which of the following is not considered research and development costs? a. Planned search or critical investigation aimed at discovery of new knowledge. b. Translation of research findings or other knowledge into a plan or design for a new product or process. c. Translation of research findings or other knowledge into a significant improvement of an existing product. d. Cost of marketing research to promote a new product.

D

Which of the following is not reported as part of continuing operations? a. Amortization expense. b. Impairment losses for intangible assets. c. Research and development costs. d. Goodwill.

D

Which of the following is not reported under the "Other Expenses and Losses" section of the income statement? a. Goodwill impairment losses. b. Loss on sale of patent. c. Patent impairment losses. d. Trade name amortization expense.

D

Which of the following is often reported as part of operating expenses? a. Loss on sale of patent. b. Impairment losses for intangible assets other than goodwill. c. Impairment losses on goodwill. d. Amortization expense.

D

Which of the following principles best describes the current method of accounting for research and development costs? a. Associating cause and effect b. Systematic and rational allocation c. Income tax minimization d. Immediate recognition as an expense

D

Which of the following research and development expenditures should be capitalized and depreciated? a. Engineering costs incurred to advance the new product to a production stage b. Cost of marketing research to promote a new product c. Material, labor, and overhead costs incurred in developing a new product d. Acquisition of machinery that can also be used for future R&D projects

D

Which of the following would be considered research and development costs? a. Routine efforts to refine an existing product. b. Periodic alterations to existing production lines. c. Marketing research to promote a new product. d. Construction of prototypes.

D

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 a. patents and amortized over the legal life of the patent. b. legal fees and amortized over 5 years or less. c. expenses of the period. d. patents and amortized over the remaining useful life of the patent.

D

Which characteristic is not possessed by intangible assets? a. Physical existence. b. Long-lived. c. Result in future benefits. d. Expensed over current and/or future years.

a. Physical existence.

Which of the following does not describe intangible assets? a. They lack physical existence. b. They are financial instruments. c. They provide long-term benefits. d. They are classified as long-term assets.

b. They are financial instruments.

Which of the following characteristics do intangible assets possess? a. Physical existence. b. Claim to a specific amount of cash in the future. c. Long-lived. d. Held for resale.

c. Long-lived.