Question 1

Candalibra Company incurred the following costs during the year ended December 31,2017:  What is the total amount to be classified and expensed as research and development in 2017?
A)$285,000
B)$685,000
C)$775,000
D)$995,000

Accepted Answer

The answer of Candalibra Company incurred the following costs during...

Question 2

Capitol Company decided to sell one of its subsidiaries,Subsidiary ABC.BiRite Inc,is the purchaser of this subsidiary.The selling price for Subsidiary ABC is $2,000,000.BiRite performed a valuation analysis of Subsidiary's ABC assets acquired and liabilities.The following table presents book values from Subsidiary ABC financial statements and fair values determined by BiRite:
  a.Prepare the journal entry made by BiRite to record the acquisition of Subsidiary ABC.
b.Describe how the journal entry would be different if the acquisition prices was $1 million.

Accepted Answer

The answer of Capitol Company decided to sell one of...

Question 3

Factors considered in determining an intangible asset's useful life include all of the following except ________.
A)legal provisions
B)effects of technological advances
C)contractual factors
D)the amortization method

Accepted Answer

All of the options except for D are factors that would be considered in determining an intangible asset's useful life. The amortization method, on the other hand, is a method for allocating the cost of the intangible asset over its useful life, rather than a factor to be considered in determining the length of that useful life.

Question 4

Rinky-Dink Inc.incurred research and development costs of $200,000 and legal fees of $100,000 to acquire a patent.The patent has a legal life of 20 years and a useful life of 10 years.What amount should the company record as patent amortization expense in the first year?
A)$10,000
B)$15,000
C)$20,000
D)$30,000

Accepted Answer

The answer of Rinky-Dink Inc.incurred research and development costs of...

Question 5

Companies should evaluate indefinite life intangible assets at least annually for ________.
A)amortization
B)impairment
C)useful life
D)gains or losses

Accepted Answer

Indefinite life intangible assets such as trademarks, brand names, and goodwill are not amortized but need to be tested for impairment at least annually. This is to ensure that the asset is still worth its recorded value and has not decreased in value due to changes in the market, technology, or any other relevant factors that affect the asset's value.

Question 6

U.S.GAAP requires straight-line amortization of finite-life intangible assets over the useful life or legal life,whichever is shorter.

Accepted Answer

The answer of U.S.GAAP requires straight-line amortization of finite-life intangible...

Question 7

Finite-life intangible assets are reported on the balance sheet at their ________.
A)net realizable value
B)replacement cost
C)acquisition cost
D)carrying value

Accepted Answer

The answer of Finite-life intangible assets are reported on the...

Question 8

What is meant by a bargain purchase and how is it recorded?

Accepted Answer

The answer of What is meant by a bargain purchase...

Question 9

Kow-Pow Company purchased a limited-life intangible asset for $150,000 on May 1,2015.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31,2017?
A)$0
B)$30,000
C)$40,000
D)$45,000

Accepted Answer

The formula for calculating the annual amortization expense is the cost of the asset divided by its useful life. 
Annual amortization expense = $150,000 / 10 years = $15,000
To determine the total amortization expense recorded by December 31, 2017 (which is the end of the third year since the purchase), we multiply the annual expense by the number of years passed: 
Total amortization expense = $15,000 x 3 years = $45,000. 
Therefore, the correct answer is Choice C ($40,000).

Question 10

Depreciation is the systematic and rational allocation of the cost of a finite-life intangible asset to expense.

Accepted Answer

Depreciation is the systematic and rational allocation of the cost of a tangible or physical asset to expense. The correct term for the allocation of the cost of a finite-life intangible asset is amortization.

Question 11

If the firm sells the intangible asset,it recognizes a gain or loss on the income statement,measured as the difference between the sales proceeds and the carrying value of the asset.

Accepted Answer

This statement is true. When a firm sells an intangible asset, it recognizes a gain or loss on the income statement based on the difference between the sales proceeds and the carrying value of the asset.

Question 12

The period of amortization of finite-life intangible assets should be either the useful life or legal life,whichever is longer.

Accepted Answer

The answer of The period of amortization of finite-life intangible...

Question 13

Under what circumstances,if any,may R&D costs be capitalized instead of expensed?

Accepted Answer

The answer of Under what circumstances,if any,may R&D costs be...

Question 14

Over what period of time should a patent be amortized?
A)twenty years
B)its useful life
C)twenty years or its useful life,whichever is shorter
D)twenty years or its useful life,whichever is longer

Accepted Answer

A patent is granted for a period of 20 years from the filing date of the application. However, the useful life of a patent may be shorter than its legal life due to technological advancements and changes in the market. Therefore, it is appropriate to amortize the patent over the shorter of the two periods, which is either twenty years or the useful life of the patent, whichever is shorter. This ensures that the asset is recorded at its fair value on the balance sheet and that the amortization expense is matched with the revenue generated by the patent.

Question 15

Over what period of time should a copyright be amortized?
A)life of the creator plus 70 years
B)its useful economic life
C)life of the creator plus 70 years or its useful economic life,whichever is shorter
D)Copyrights are never amortized.

Accepted Answer

Copyrights are amortized over the shorter of the creator's life plus 70 years or its useful economic life.

Question 16

Which of the following methods of amortization is normally used for intangible assets?
A)straight-line method
B)units-of-production method
C)finite-life method
D)declining-balance method

Accepted Answer

The answer of Which of the following methods of amortization...

Question 17

Which,if any,intangible assets are subject to amortization?
A)Only finite-life intangible assets are subject to amortization.
B)Only indefinite-life intangible assets are subject to amortization.
C)Both finite and indefinite-life intangible assets are subject to amortization.
D)No intangible assets are subject to amortization.

Accepted Answer

Only finite-life intangible assets are subject to amortization. Intangible assets with indefinite lives are not amortized but are subject to annual impairment testing.

Question 18

Over what period of time should goodwill be amortized?
A)40 years
B)its useful economic life
C)40 years or its useful economic life,whichever is shorter
D)Goodwill is never amortized.

Accepted Answer

The answer of Over what period of time should goodwill...

Question 19

Only finite-life intangible assets are subject to amortization.

Accepted Answer

Only finite-life intangible assets, such as patents, copyrights, and trademarks, are subject to amortization. Other intangible assets, such as goodwill, are not subject to amortization but could be subject to impairment testing.

Question 20

Rinky-Dink Inc.incurred research and development costs of $200,000 and legal fees of $100,000 to acquire a patent.The patent has a legal life of 20 years and a useful life of 10 years.What amount should the company record as patent amortization expense in the first year?
A)$10,000
B)$15,000
C)$20,000
D)$30,000

Accepted Answer

The patent amortization expense for the first year is calculated as (Research and development costs + Legal fees) / Useful life = ($200,000 + $100,000) / 10 years = $30,000 / 10 years = $3,000 per year.

Quiz 12: Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Candalibra Company incurred the following costs during the year ended December 31,2017: What is the total amount to be classified and expensed as research and development in 2017?

Factors considered in determining an intangible asset's useful life include all of the following except ________.

Rinky-Dink Inc.incurred research and development costs of $200,000 and legal fees of $100,000 to acquire a patent.The patent has a legal life of 20 years and a useful life of 10 years.What amount should the company record as patent amortization expense in the first year?

Companies should evaluate indefinite life intangible assets at least annually for ________.

U.S.GAAP requires straight-line amortization of finite-life intangible assets over the useful life or legal life,whichever is shorter.

Finite-life intangible assets are reported on the balance sheet at their ________.

What is meant by a bargain purchase and how is it recorded?

Kow-Pow Company purchased a limited-life intangible asset for $150,000 on May 1,2015.It has a useful life of 10 years.What total amount of amortization expense should have been recorded on the intangible asset by December 31,2017?

Depreciation is the systematic and rational allocation of the cost of a finite-life intangible asset to expense.

If the firm sells the intangible asset,it recognizes a gain or loss on the income statement,measured as the difference between the sales proceeds and the carrying value of the asset.

The period of amortization of finite-life intangible assets should be either the useful life or legal life,whichever is longer.

Under what circumstances,if any,may R&D costs be capitalized instead of expensed?

Over what period of time should a patent be amortized?

Over what period of time should a copyright be amortized?

Which of the following methods of amortization is normally used for intangible assets?

Which,if any,intangible assets are subject to amortization?

Over what period of time should goodwill be amortized?

Only finite-life intangible assets are subject to amortization.

Rinky-Dink Inc.incurred research and development costs of $200,000 and legal fees of $100,000 to acquire a patent.The patent has a legal life of 20 years and a useful life of 10 years.What amount should the company record as patent amortization expense in the first year?