Question 1

Natural resources are generally shown on the balance sheet under

Accepted Answer

Natural resources are typically classified as Property, Plant, and Equipment on the balance sheet. This category includes assets such as land, buildings, machinery, and other physical assets that have a useful life of more than one year. Intangible assets refer to things like patents or copyrights, while investments and owner's equity are other categories unrelated to natural resources.

Question 2

Copyrights are granted by the federal government

Accepted Answer

Copyrights are granted for the life of the creator plus 50 years under the current law. This means that the creator holds the exclusive rights to their work during their lifetime, and for 50 years after their death, their estate or heirs hold those rights. This is subject to change based on future revisions to copyright law.

Question 3

A franchise should be classified on the balance sheet as a(n)

Accepted Answer

A franchise is considered an intangible asset because it represents a right or license to use a certain business name or system, which cannot be physically touched or seen. It is important to note that if the franchise is acquired through payment of a lump sum, it should be accounted for and reported separately from other intangible assets on the balance sheet.

Question 4

Goodwill

Accepted Answer

Goodwill should be recorded as an intangible asset and carried on the balance sheet unless an impairment in value occurs. Goodwill cannot be expensed upon purchase, sold separately, or charged directly to owner's equity.

Question 5

Research costs

Accepted Answer

Research costs must be expensed when incurred under both IFRS and ASPE. They are not classified as intangible assets and cannot be included in the cost of the patent they relate to. They cannot be capitalized and depreciated over a period of 40 years.

Question 6

An intangible asset should

Accepted Answer

Intangible assets with an indefinite life should not be amortized. Instead, they are tested annually for impairment. Amortization applies to intangible assets with a finite life, while depreciation is for tangible assets. Intangible assets are reported separately from property, plant, and equipment on the balance sheet.

Question 7

Which of the following is an intangible asset that has a finite life?

Accepted Answer

Patents are intangible assets that have a finite life. They expire after a certain period, usually 20 years from the date of application. Goodwill, trademarks, and franchises are also intangible assets, but they do not have a finite life and can potentially last indefinitely.

Question 8

A high return on assets indicates

Accepted Answer

A high return on assets (ROA) indicates that a company is generating a higher level of profit for each dollar invested in its assets. This means the company is operating efficiently and profitably. Conversely, a low ROA suggests that the company is not generating significant profits despite the amount of assets it has, which could indicate financial difficulty. Therefore, choice A is the best answer.

Question 9

Which of the following statements concerning financial statement presentation is NOT a true statement?

Accepted Answer

The balances of all individual assets, as they appear in the subsidiary long-lived asset ledger, do not have to be disclosed in the footnotes. While major classes of assets and their accumulated depreciation may be disclosed in the footnotes, individual assets do not have to be listed.

Question 10

With of the following statements is most accurate with respect to goodwill?

Accepted Answer

Goodwill is not subject to annual amortization according to US GAAP. Instead, it is tested annually for impairment. This means that if the fair value of the reporting unit, to which the goodwill is assigned, is less than its carrying value (including the goodwill), then impairment is recognized, and the goodwill is written down to its implied fair value.

Question 11

Intangible assets

Accepted Answer

Intangible assets are reported on the balance sheet as a separate classification because they have value and contribute to the future income of the company, despite lacking physical substance. They are not expensed immediately (unless they have an indefinite life and cannot be reliably measured), not excluded from the balance sheet, and are typically classified as non-current assets, not current assets.

Question 12

Asset turnover is calculated as follows:

Accepted Answer

Asset turnover measures a company's efficiency in using its assets to generate revenue. It is calculated by dividing net sales by average total assets. Therefore, the correct choice is A) net sales divided by average total assets.

Question 13

Development costs

Accepted Answer

Development costs can be capitalized if they meet certain criteria, such as having a clear and identifiable future economic benefit, and can be reliably measured. This means that they can be recorded as an asset and then amortized (or gradually expensed) over their expected useful life.

Question 14

For the year ended December 31, 2017, Akito Co. has net sales of $1,000,000 and profit of $290,000. Total assets on January 1, 2017 were $1,750,000 and total assets at December 31, 2017 are $1,245,000. Akito's return on assets for 2017 is

Accepted Answer

The answer of For the year ended December 31, 2017,...

Question 15

In recording the acquisition cost of an entire business,

Accepted Answer

Goodwill is recognized in accounting as the excess of the purchase price of a business over the fair value of its net identifiable assets. This represents intangible assets that are not separately identifiable, such as brand reputation or customer relationships. Choices B, C, and D are incorrect because assets acquired in a business combination are recorded at their fair value, not the seller's carrying amounts; goodwill is indeed recorded if it exists; and it is the excess over the fair value of net identifiable assets, not the carrying amount.

Question 16

For an intangible asset with a finite life, the cost less residual value should be allocated over the

Accepted Answer

The answer of For an intangible asset with a finite...

Question 17

Which of the following is NOT an intangible asset that is reported on the balance sheet?

Accepted Answer

The answer of Which of the following is NOT an...

Question 18

Which of the following statements is correct with respect to the return on assets ratio?

Accepted Answer

Return on assets (ROA) is a profitability ratio that measures how efficiently a company is using its assets to generate profits. A high ROA indicates that the company is generating more profits for every dollar invested in assets, which is a good sign of profitability.

Question 19

A patent can be renewed

Accepted Answer

Patents cannot be renewed. Once a patent expires, typically after 20 years from the filing date for utility patents, the protection ends, and the invention enters the public domain.

Quiz 9: Long-Lived Assets