ACC 304 Week 7 Quiz – Strayer NEW

ACC 304 Week 7 Quiz – Strayer NEW

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Week 7 Quiz 4: Chapter 12

INTANGIBLE ASSETS

IFRS questions are available at the end of this chapter.


TRUE-FALSE—Conceptual

1. Intangible assets derive their value from the right (claim) to receive cash in the future.


2. Internally created intangibles are recorded at cost.


3. Internally generated intangible assets are initially recorded at fair value.


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


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


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


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


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

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.

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


11. Internally generated goodwill should not be capitalized in the accounts.


12. 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.


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


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


15. If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period.


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


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


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


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


20. Contra accounts must be reported for intangible assets in a manner similar to accumu-lated depreciation and property, plant, and equipment.


True False Answers—Conceptual

MULTIPLE CHOICE—Conceptual

21. 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.


22. 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.


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


24. 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.


25. 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 the above.


26. 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


27. 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.


28. 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.


29. 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.



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



S31. 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.


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


33. 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.

34. Broadway Corporation was granted a patent on a product on January 1, 2001. To protect its patent, the corporation purchased on January 1, 2012 a patent on a competing product which was originally issued on January 10, 2008. 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 2012.


35. Wriglee, Inc. went to court this year and successfully defended its patent from infringe-ment 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.



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


37. 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.


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



39. 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.


40. 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.

41. 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.



42. 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 the above.


43. 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. Brand Name.


44. 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 tangible and identifiable intangible 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.


45. 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 to Easton. Proper accounting treatment by Easton is to 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.


46. 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.



47. 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.


48. A loss on impairment of an i