ACC 304 WEEK 11 FINAL EXAM
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ACC 304 WEEK 11 FINAL EXAM
ACC 304 Week 11 Final Exam – STR NEW
ACC 304 Week 11 Final Exam
All Questions Included.
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.
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 notbe
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.Eastonwas 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
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.
49. 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.
50. 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)
Recoverability Test Fair Value
Test
a.
Yes
Yes
b.
Yes
No
c
No
Yes
d.
No
No
51. 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.
52. 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
53. 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
54. How should research and development
costs be accounted for, according to a Financial Accounting Standards Board
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.
55. 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.
56. 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.
57. 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.
58. Which of the following is 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. all of the above.
59. Which of the following is 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. Neither a nor b.
d. Both a and b.
60. Which of the following costs should
be excludedfrom
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
61. 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.
62. 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.
63. 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.
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