Intermediate accounting- Chapter 12

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. Perpetual franchises

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. Immediate recognition as an expense

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

D. The amortization method used

Copyrights should be amortized over a. their legal life. b. the life of the creator plus fifty years. c. twenty years. d. their useful life or legal life, whichever is shorter

D. Their useful life or legal life, whichever is shorter

Thompson Company incurred research and development costs of €100,000 and legal fees of €50,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Thompson record as Patent Amortization Expense in the first year? a. €0. b. € 5,000. c. € 7,500. d. €15,000

b €50,000 ÷ 10 = €5,000

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

b. They are monetary assets

Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.'s €5 par value ordinary shares and €85,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.'s shares were selling at €7.50 per share. When Mini Corp. acquired the patent, its shares were selling for €9 a share. Mini Corp. should record the patent at what amount? a. € 97,500 b. €103,750 c. €107,500 d. € 85,000

c (2,500 x €9) + €85,000 = €107,500

Companies are required to assess the estimated useful life and salvage value of intangible assets at least annually.

t

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

B. Research and development cost

Which of the following costs would not be capitalized? a. Acquisition cost of equipment to be used on current and future research projects. b. Engineering costs incurred to advance the project to the full production stage. c. Cost incurred to file for patent. d. Cost of testing prototype before economic feasibility has been demonstration

D. Cost of testing prototype before economic feasibility has been demonstration

Internally generated goodwill should not be capitalized in the accounts

T *Goodwill generated internally should not be capitalized in the accounts. The reason? Measuring the components of goodwill is simply too complex, and associating any costs with future benefits is too difficult.*

The impairment test for goodwill is conducted based on the cash-generating unit to which the goodwill has been assigned

TRUE *because goodwill generates cash flows only in combination with other assets, the impairment test is conducted based on the cash-generating unit to which the goodwill is assigned*

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

t

Start-up costs include organizational costs, such as legal and state fees incurred to organize a new business entity. 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. Expensed as incurred

Which of the following is considered research and development costs? a. Laboratory research aimed at discovery of new knowledge. b. Application of research findings or other knowledge to a plan or design for a new product or process. c. Conceptual formulation and design of possible product or process alternatives. d. all of the above

D. all of the above

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 are included

D. all of these are included

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 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 purchaser's product. 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.

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

Which of the following is considered research and development costs? a. Planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. b. Application of research findings or other knowledge to a plan or design for a new product or process. c. Neither a nor b. d. Both a and b

D. both a and b

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

F

IFRS permits reversals of impairment losses for all limited and indefinite-life intangible assets

FALSE

Goodwill is considered a master valuation account because it measures the value of specifically identifiable intangible assets

FALSE * The master valuation approach assumes goodwill covers all the values that CANNOT be specifically identified with any identifiable tangible or intangible asset*

The cost of purchased patents should be amortized over the remaining legal life of the patent

FALSE *Companies should amortize the cost of a patent over its legal life or its useful life (the period in which benefits are received), whichever is shorter*

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

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. Capitalized only when purchased

Which of the following costs of goodwill should be amortized over their estimated useful lives? 1.Costs of goodwill business combination/ 2. Costs of developing goodwill internally a. No No b. No Yes c. Yes Yes d. Yes No

A. No & No

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. Salvage value

Research phase costs are capitalized as an intangible asset once the project has economic viability

f

Impairment testing is conducted annually for both limited-life and indefinite-life intangible assets

f *Companies should test indefinite-life intangibles other than goodwill for impairment at least annually*. *Companies should review property, plant, and equipment for impairment at certain points—whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable*

T/F Intangible assets derive their value from the rights to receive cash in the future

f *Intangible assets derive their value from the rights and privileges granted to the company using them*

All research phase and development phase costs are expensed as incurred

f *companies expense all research phase costs and some development phase costs*

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

t

Some intangible assets are not required to be amortized every year

t *Intangible assets that have indefinite lives are not amortized* *Limited Life intangible assets should be amortized over their useful lives-using straight line method*

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. Application of research findings or other knowledge to a plan for a new product or process. c. Laboratory research aimed at discovery of new knowledge. d. Conceptual formulation and design of possible product or process alternatives

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

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

true *Customer-related intangible assets result from interactions with outside parties. Examples include customer lists, order or production backlogs, and both contractual and noncontractual customer relationships.*

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

t

Which intangible assets are amortized? Limited-Life Indefinite-Life a. Yes Yes b. Yes No c. No Yes d. No No

B. Limited life- yes Indefinite life- no

Which of the following legal fees should be capitalized? 1. Legal fees obtain a copyright 2. Legal fees to successfully defend a trademark a. No No b. No Yes c. Yes Yes d. Yes No

C. yes & yes

A recovery of impairment for an intangible long-lived asset is limited to the carrying value that would have been reported had the impairment not occurred

T

Accounting for impairments for limited-life intangible assets follows the same rules used to account for impairments of plant and equipment

T

Recoveries of impairments for intangible long-lived assets are reported in "other income and expense" on the income statement

T

On January 2, 2019, Klein Co. bought a trademark from Royce, Inc. for €1,200,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Royce's books was €900,000. In Klein's 2019 income statement, what amount should be reported as amortization expense? a. €120,000. b. € 90,000. c. € 60,000. d. € 45,000

a €1,200,000 ÷ 10 = €120,000

Riley Co. incurred the following costs during 2019: Significant modification to the formulation of a chemical product €160,000 Trouble-shooting in connection with breakdowns during commercial production 150,000 Cost of exploration of new formulas 200,000 Seasonal or other periodic design changes to existing products 185,000 Laboratory research aimed at discovery of new technology 275,000 In its income statement for the year ended December 31, 2019, Riley should report research and development expense of a. €635,000. b. €785,000. c. €820,000. d. €970,000

a €160,000 + €200,000 + €275,000 = €635,000

Lopez Corp. incurred €420,000 of research costs to develop a product for which a patent was granted on January 2, 2014. Legal fees and other costs associated with registration of the patent totaled €80,000. On March 31, 2019, Lopez paid €130,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2019 should be a. €210,000. b. €500,000. c. €550,000. d. €650,000.

a €80,000 + €130,000 = €210,000

All of the following are true regarding recovery of impairments for intangible assets except a. After a recovery of impairment has been recognized, the carrying value of the asset reported on the statement of financial position will be the higher of the fair value less cost to sell or the value-in-use. b. No recovery of impairment is allowed for Goodwill. c. A recovery of impairment will be reported in the "Other income and expense" section of the income statement. d. The amount of the recovery is limited to the carrying value of the asset that would have been reported had no impairment occurred.

a. After a recovery of impairment has been recognized, the carrying value of the asset reported on the statement of financial position will be the higher of the fair value less cost to sell or the value-in-use.

Day Company purchased a patent on January 1, 2018 for €480,000. The patent had a remaining useful life of 10 years at that date. In January of 2019, Day successfully defends the patent at a cost of €216,000, extending the patent's life to 12/31/30. What amount of amortization expense would Kerr record in 2019? a. €48,000 b. €54,000 c. €58,000 d. €72,000

b [(€480,000 - €48,000) + €216,000] ÷ 12 = €54,000

Blue Sky Company's 12/31/19 statement of financial position reports assets of €5,000,000 and liabilities of €2,000,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is €300,000 greater than its book value. On 12/31/19, Horace Wimp Corporation paid €5,400,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase? a. € -0- b. €400,000 c. €2,100,000 d. €2,400,000

c (€5,000,000 + €300,000) - €2,000,000 = €3,300,000 €5,400,000 - €3,300,000 = €2,100,000

On June 30, 2019, Cey, Inc. exchanged 2,000 shares of Seely Corp. €25 par value ordinary shares for a patent owned by Gore Co. The Seely stock was acquired in 2019 at a cost of €55,000. At the exchange date, Seely ordinary shares had a fair value of €48 per share, and the patent had a net carrying value of €110,000 on Gore's books. Cey should record the patent at a. €50,000. b. €55,000. c. €96,000. d. €110,000

c 2,000 × €48 = €96,000

Ely Co. bought a patent from Baden Corp. on January 1, 2019, for €360,000. An independent consultant retained by Ely estimated that the remaining useful life at January 1, 2019 is 15 years. Its unamortized cost on Baden's accounting records was €180,000; the patent had been amortized for 5 years by Baden. How much should be amortized for the year ended December 31, 2019 by Ely Co.? a. €0. b. €18,000. c. €24,000. d. €36,000

c €360,000 ÷ 15 = €24,000

During 2019, Leon Co. incurred the following costs: Testing in search for process alternatives € 380,000 Costs of marketing research for new product 250,000 Modification of the formulation of a process 510,000 Research and development services performed by Beck Corp. for Leon 425,000 In Leon's 2019 income statement, research and development expense should be a. €510,000. b. €935,000. c. €1,315,000. d. €1,565,000

c €380,000 + €510,000 + €425,000 = €1,315,000

January 2, 2016, Koll, Inc. purchased a patent for a new consumer product for €450,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2019, the product was permanently withdrawn from the market under governmental order because of a potential health hazard in the product. What amount should Koll charge against income during 2019, assuming amortization is recorded at the end of each year? a. € 45,000 b. €270,000 c. €315,000 d. €360,000

c €450,000 - [(€450,000 ÷ 10) × 3] = €315,000

On January 1, 2015, Russell Company purchased a copyright for £1,200,000, having an estimated useful life of 16 years. In January 2019, Russell paid £180,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2019, should be a. £0. b. £75,000. c. £86,250. d. £90,000

d (£1,200,000 - [(£1,200,000 ÷ 16) × 4] = £900,000 (£900,000 + £180,000) ÷ 12 = £90,000

On May 5, 2019, MacDougal Corp. exchanged 2,000 shares of its £25 par value ordinary treasury shares for a patent owned by Masset Co. The treasury shares were acquired in 2018 for £45,000. At May 5, 2019, MacDougal's ordinary shares was quoted at £38 per share, and the patent had a carrying value of £68,000 on Masset's books. MacDougal should record the patent at a. £45,000. b. £50,000. c. £60,000. d. £76,000

d 2,000 × £38 = £76,000.

Contreras Corporation acquired a patent on May 1, 2019. Contreras paid cash of €35,000 to the seller. Legal fees of €900 were paid related to the acquisition. What amount should be debited to the patent account? a. €900 b. €34,100 c. €35,000 d. €35,900

d €35,000 + €900 = €35,900

Floyd Company purchases Haeger Company for €840,000 cash on January 1, 2019. The book value of Haeger Company's net assets, as reflected on its December 31, 2018 statement of financial position is €620,000. An analysis by Floyd on December 31, 2018 indicates that the fair value of Haeger's tangible assets exceeded the book value by €60,000, and the fair value of identifiable intangible assets exceeded book value by €45,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? a. € -0- b. €220,000 c. €160,000 d. €115,000

d €620,000 + €60,000 + €45,000 = €725,000. €840,000 - €725,000 = €115,000

How should research and development costs be accounted for, according to an IASB Statement? a. Must be capitalized when incurred and then amortized over their estimated useful lives. b. Must be expensed in the period incurred. c. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved. 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

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

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 *Internally generated goodwill is not recognized as an asset because its not an identifiable resource*

6 categories for intangible assets

1. Marketing-related intangible assets. 2. Customer-related intangible assets. 3. Artistic-related intangible assets. 4. Contract-related intangible assets. 5. Technology-related intangible assets. 6. Goodwill.

Limited-life intangibles are reported at their a. replacement cost. b. carrying amount unless impaired. c. acquisition cost. d. liquidation value

B. Carrying amount unless impaired

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. Depreciation deducted as part of research and development costs

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. expensed as incurred

Which of the following would be considered research and development? 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. Construction of prototypes

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. Costs to successfully defend a patent

In January, 2014, Findley Corporation purchased a patent for a new consumer product for €840,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2019 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Findley charge to expense during 2019, assuming amortization is recorded at the end of each year? a. €560,000. b. €420,000. c. € 84,000. d. € 56,000.

b (€840,000 ÷ 10) × 5 = €420,000

Alonzo Co. acquires 3 patents from Shaq Corp. for a total of £300,000. The patents were carried on Shaq's books as follows: Patent AA: £5,000; Patent BB: £2,000; and Patent CC: £3,000. When Alonzo acquired the patents their fair values were: Patent AA: £20,000; Patent BB: £240,000; and Patent CC: £60,000. At what amount should Alonzo record Patent BB? a. £100,000 b. £240,000 c. £2,000 d. £225,000

d £300,000 x (£240,000 / £320,000) = £225,000

Lynne Corporation acquired a patent on May 1, 2019. Lynne paid cash of €40,000 to the seller. Legal fees of €1,000 were paid related to the acquisition. What amount should be debited to the patent account? a. €1,000 b. €39,000 c. €40,000 d. €41,000

d €40,000 + €1,000 = €41,000

Amortization of limited-life intangible assets should not be impacted by expected residual values

f *The amount of an intangible asset to be amortized should be its cost less residual value. The residual value is assumed to be zero unless at the end of its useful life the intangible asset has value to another company*

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

A. Goodwill

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

A. Physical existence

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

A. The patents account

Which of the following costs would be capitalized? a. Acquisition cost of equipment to be used on current research project only. b. Engineering costs incurred to advance the product to the full production stage. c. Cost of research to determine whether a market for the product exists. d. Salaries of research staff

B. Engineering costs incurred to advance the product to the full production stage

The reason goodwill is sometimes referred to as a master valuation account is because a. it represents the purchase price of a business that is about to be sold. b. it is the difference between the fair value of the net identifiable assets as compared with the purchase price of the acquired business. c. the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation. d. it 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. It is the difference between the fair value of the net identifiable assets as compared with the purchase price of the acquired business

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 the above

B. May result in the development of a patent

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. One company acquires another in a business combination

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. Straight-line

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 recoverable amount. c. recoverable amount and the expected future net cash flows. d. book value and its fair value

B. The carrying amount and its recoverable amount

Which of the following should not be reported under the "Other income and expense" section of the income statement? a. Goodwill impairment losses. b. Trade name amortization expense. c. Recovery of impairment losses d. All of these choices are correct

B. Trade name amortization expense

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. limited-life or indefinite-life

Broadway Corporation was granted a patent on a product on January 1, 2008. To protect its patent, the corporation purchased on January 1, 2019 a patent on a competing product which was originally issued on January 10, 2015. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing a 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 201

C. Amortized over a maximum period of 9 years

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. 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? a. Patent. b. Copyright. c. Goodwill. d. Trade name

C. Goodwill

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

C. Impairment

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

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 Patent account. b. shown in the current income statement. c. reflected as credits in the Patent account. d. reflected as a contra property, plant and equipment item

C. Reflected as credits in the patent account

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

C. Research and development fees

Which of the following is not a criteria which must be met before development costs can be capitalized? a. The company has sufficient financial resources to complete the project. b. The company intends to complete the project and either use or sell the intangible asset. c. The company can reliably identify the research costs incurred to bring the project to economic feasibility. d. The project has achieved technical feasibility

C. The company can reliably identify the research costs incurred to bring the project to economic feasibility

Intangible assets are reported on the statement of financial position a. with an accumulated depreciation account. b. in the property, plant, and equipment section. c. as a separate item. d. None of these choices are correct

C. as a separate item

Recovery of impairment is recognized for all the following except a. Patent held for sale. b. Patent held for use. c. Trademark. d. Goodwill

D. Goodwill

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. Patents and amortized over the remaining useful life of the patent

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 trade name. b. A patent. c. A customer list. d. All of the above

D. all of the above

A patent should be amortized over a. twenty years. b. its useful life. c. its useful life or twenty years, whichever is longer. d. its useful life or twenty years, whichever is shorter

D. its useful life or twenty years, whichever is shorter

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

D. not to be amortized

The major problem of accounting for intangibles is determining a. fair value. b. separability. c. salvage value. d. useful life

D. useful life

After an impairment loss is recorded for goodwill, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods.

F

Contra accounts must be reported for intangible assets in a manner similar to the reporting of property, plant, and equipment

F

IFRS requires that start-up costs and initial operating losses during the early years be capitalized.

F

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

F

Research and development costs are recorded as an intangible asset if it is felt they will provide economic benefits in future years.

F

A cash-generating unit is the smallest identifiable group of assets in a business that can generate cash flow independently of the cash flows from the business's other assets

T

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount becomes the basis for the impaired asset and is used to calculate amortization in future periods

T

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

T

If the recoverable amount of an indefinite-life intangible other than goodwill is less than its carrying value, an impairment loss must be recognized

T

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

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

a. Research phase costs

ELO Corporation purchased a patent for £135,000 on September 1, 2017. It had a useful life of 10 years. On January 1, 2019, ELO spent £33,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2019? a. £30,900. b. £30,000. c. £28,200. d. £23,400

b £135,000 - [(£135,000 ÷ 10) × 1 1/3] = £117,000. (£117,000 + £33,000) ÷ 5 = £30,000

A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2017 for £2,100,000. The company uses straight-line amortization for patents. On January 2, 2019, a new patent is received for a timed-release version of the same drug. The new patent has a legal and useful life of twenty years. The least amount of amortization that could be recorded in 2019 is a. £350,000. b. £ 70,000. c. £ 95,454. d. £ 80,500

b £2,100,000 - [(£2,100,000 ÷ 6) × 2] = £1,400,000. £1,400,000 ÷ 20 = £70,000

Danks Corporation purchased a patent for €540,000 on September 1, 2017. It had a useful life of 10 years. On January 1, 2019, Danks spent €132,000 to successfully defend the patent in a lawsuit. Danks feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2019? a. €134,400. b. €120,000. c. €123,600. d. € 93,600.

b €540,000 - [(€540,000 ÷ 10) × 1 1/3] = €468,000. (€468,000 + €132,000) ÷ 5 = €120,000

Jeff Corporation purchased a limited-life intangible asset for €150,000 on May 1, 2017. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2019? a. € -0- b. €30,000 c. €40,000 d. €45,000

c (€150,000 ÷ 10) × 2 2/3 = €40,000

Rich Corporation purchased a limited-life intangible asset for €270,000 on May 1, 2017. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2019? a. € -0-. b. €54,000 c. €72,000 d. €81,000

c (€270,000 ÷ 10) × 2 2/3 = €72,000

Dotel Company's 12/31/19 statement of financial position reports assets of €6,000,000 and liabilities of €2,500,000. All of Dotel's assets' book values approximate their fair value, except for land, which has a fair value that is €400,000 greater than its book value. On 12/31/19, Egbert Corporation paid €6,500,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase? a. € -0- b. € 500,000 c. €2,600,000 d. €3,000,000

c (€6,000,000 + €400,000) - €2,500,000 = €3,900,000. €6,500,000 - €3,900,000 = €2,600,000

The general ledger of Vance Corporation as of December 31, 2019, includes the following accounts: Copyrights £ 30,000 Deposits with advertising agency (will be used to promote goodwill) 27,000 Bond sinking fund 70,000 Excess of cost over fair value of identifiable net assets of Acquired subsidiary 390,000 Trademarks 120,000 In the preparation of Vance's statement of financial position as of December 31, 2019, what should be reported as total intangible assets? a. £510,000. b. £537,000. c. £540,000. d. £537,000

c £30,000 + £390,000 + £120,000 = £540,000

In a business combination, the excess of the cost of the purchase over the fair value of the identifiable net assets purchased is a. other assets. b. indirect costs. c. goodwill. d. a bargain purchase.

c. Goodwill