1. The cost of an intangible asset with an indefinite life should A) be amortize
ID: 2447841 • Letter: 1
Question
1. The cost of an intangible asset with an indefinite life should
A) be amortized over 20 years.
B) be amortized over the life of the creator plus 70 years.
C) not be amortized.
D) none of the above.
2. Cost allocation of an intangible asset is referred to as
A) amortization.
B) depreciation.
C) accretion.
D) capitalization.
3. If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting
A) Legal Expense.
B) the Intangible Loss account.
C) the Patent account.
D) a revenue expenditure account.
4. Copyrights are granted by the federal government
A) for the life of the creator or 70 years, whichever is longer.
B) for the life of the creator plus 70 years.
C) for the life of the creator or 70 years, whichever is shorter.
D) and therefore cannot be amortized.
5. In recording the acquisition cost of an entire business
A) goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
B) assets are recorded at the seller's book values.
C) goodwill, if it exists, is never recorded.
D) goodwill is recorded as the excess of cost over the book value of identifiable net assets.
6. Goodwill
A) may be expensed upon purchase if desired.
B) can be sold by itself to another company.
C) can be purchased and charged directly to stockholders' equity.
D) is only recorded when the purchase of an entire business occurs.
7. Trademarks are generally shown on the balance sheet under
A) Intangibles.
B) Investments.
C) Property, Plant, and Equipment.
D) Current Assets.
8. Which of the following is not an intangible asset that is reported on the balance sheet?
A) Goodwill
B) Trademarks
C) Employees
D) Copyrights
9. Given the following account balances at year end, compute the total intangible assets on the balance sheet of Anisha Enterprises.
Cash $1,500,000
Accounts Receivable 4,000,000
Trademarks 1,000,000
Goodwill 4,500,000
Research & Development Costs 2,000,000
A) $11,500,000
B) $7,500,000
C) $5,500,000
D) $9,500,000
Explanation / Answer
C) not be amortized.
2. Amortization is the process of allocating the cost (in the case of intangible asset) to expense over the period of beneficial life. Depreciable amount of the intangible asset should be allocated on a systematic basis over the best estimates of its useful life. Amortization should start when the asset is available for use. So the cost allocation of an intangible asset is referred to as Amortization. Answer is
A) Amortization
3. The costs which are incurred to bring the asset for put to use are capitalized. Subsequent costs are capitalized only if those costs increase the economic benefits from that asset. This is same for either tangible or intangible assets. When it comes to legal costs defending the patent, IAS 38 specifies the recognition criteria. IAS 38 says that the subsequent costs should be capitalized which would enable the asset to generate future economic benefits in excess of the originally assessed standards of performance. So Legal costs incurred in defending the patent will not meet the recognition criteria specified and it should be expensed by debiting the Legal expense. Hence the answer is
A) Legal Expense
4. Under the current copyright law, the copyright term for works created by individuals on or after January 1, 1978, is the life of the creator plus 70 years. So the answer is
B) For the life of the creator plus 70 years.
5. Goodwill is the excess of purchase price of an acquired company over their fair market value of the identifiable net assets acquired. Only purchased goodwill needs to be recognized in books. So the answer is
A) Goodwill is recorded as the excess of cost over the fair value of identifiable net assets
6. Goodwill as explained in question 5 above needs to be recorded when the purchase of a business occurs. So the answer is
C) Is only recorded when the purchase of an entire business occurs
7. A Trademark is a recognizable sign or mark of a business entity or a product. So it is an intangible asset. Hence the answer is
A) Intangibles
8. Intangible asset is an asset not having any physical substance and therefore cannot be seen or touched like Goodwill, Patent, Brands and Trademarks, Research and Development, Computer Software, etc. It is an asset which is an identifiable asset without physical substance held for use in the production or supplying of goods or services to others or for administrative purpose. Employees are not intangible and also employees are not valued at a cost. Employees are paid salaries and are expensed. Hence the answer is
C) Employees
9. As explained in the Question 8 above, intangible expenses include Goodwill, Patent, Brands, Trademarks, Research and Development, computer software, etc. Here we have the values of these intangibles as such
Trademarks - $ 1,000,000
Goodwill - $ 4,500,000
Research & Development Costs - $ 2,000,000
Total of these 3 are $1,000,000 + $ 4,500,000 + $ 2,000,000 = $7,500,000
So the answer is
B)$7,500,000
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