Chapter 12 True False
13. Internally generated goodwill associated with a business may be recorded as an asset when a firm offer to purchase that business unit has been received.
FALSE
17. The rules used to account for impairments of limited-life intangible assets are different from the rules used to account for impairments of plant and equipment.
FALSE
18. If fair value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.
FALSE
19. The same recoverability test that is used for impairments of property, plant, and equipment is used for impairments of indefinite-life intangibles.
FALSE
2. Internally generated intangible assets are initially recorded at fair value.
FALSE
20. Contra accounts must be reported for intangible assets in a manner similar to accumulated depreciation and property, plant, and equipment.
FALSE
6. If a company develops a trademark, it should expense the costs related to attorney fees, registration fees, and design costs.
FALSE
8. The cost of a purchased patent should be amortized over the remaining legal life of the patent.
FALSE
10. In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible net assets, with the remainder recorded as goodwill.
TRUE
1. Intangible assets derive their value from the right (claim) to receive cash in the future.
FALSE
11. Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets.
FALSE
21. Research and development costs that result in patents may be capitalized to the extent of the fair value of the patent.
FALSE
22. Research and development costs are recorded as intangible assets if they will provide economic benefits in future years.
FALSE
23. GAAP requires start-up costs and initial operating losses during the early years to be capitalized.
FALSE
25. Periodic alterations to existing products are an example of research and development costs.
FALSE
4. Amortization of limited-life intangible assets should not be affected by expected residual values.
FALSE
12. Internally generated goodwill should not be capitalized in the accounts.
TRUE
14. All intangibles are subject to periodic consideration of impairment with corresponding potential write-downs.
TRUE
15. 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
16. After an impairment loss is recorded for a limited-life intangible asset, the carrying amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.
TRUE
24. Material, labor, and overhead costs incurred in developing a new product are to be expensed as these are development costs.
TRUE
3. Limited-life intangibles are amortized by systematic charges to expense over their useful lives.
TRUE
5. Some intangible assets are not required to be amortized.
TRUE
7. The cost of acquiring a customer list from another company is recorded as an intangible asset.
TRUE
9. 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
