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Week 11 Final Exam: Chapter 12 Through 16
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 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 excluded from 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.
64. Which of
the following would not be considered an R & D activity?
a. Adaptation of an existing capability to a
particular requirement or customer's need.
b. Searching for applications of new research
findings.
c. Laboratory research aimed at discovery of new
knowledge.
d. Conceptual formulation and design of possible
product or process alternatives.
65. Which
of the following intangible assets should be shown as a separate item on the
balance sheet?
a. Goodwill
b. Franchise
c. Patent
d. Trademark
66. The
notes to the financial statements should include information about acquired
intangible assets, and aggregate amortization expense for how many succeeding
years?
a. 6
b. 5
c. 4
d. 3
67. Which
of the following should be reported under the “Other Expenses and Losses”
section of the income statement?
a. Goodwill impairment losses.
b. Trade name amortization expense.
c. Patent impairment losses
d. None of the above.
68. The
total amount of patent cost amortized to date is usually
a. shown in a separate Accumulated Patent
Amortization account which is shown contra to the Patents account.
b. shown in the current income statement.
c. reflected as credits in the Patents account.
d. reflected as a contra property, plant and
equipment item.
69. Intangible
assets are reported on the balance sheet
a. with an accumulated depreciation account.
b. in the property, plant, and equipment section.
c. separately from other assets.
d. none of the above.
70. Which of
the following is often reported as an extraordinary item?
a. Amortization expense.
b. Impairment losses for intangible assets other
than goodwill.
c. Impairment losses on goodwill.
d. None of the above.
71. Which
of the following is often reported as an extraordinary item?
a. Amortization expense.
b. Impairment losses for intangible assets.
c. Research and development costs.
d. None of the above.
*72. Which
of the following costs incurred with developing computer software for internal
use should be capitalized?
a. Evaluation of alternatives.
b. Coding.
c. Training.
d. Maintenance.
*73. When
developing computer software to be sold, which of the following costs should be
capitalized?
a. Designing.
b. Coding.
c. Testing.
d. None of the above.
*74. Capitalized
costs incurred to develop internal use computer software should be amortized
using the:
a. percent-of-revenue approach.
b. percent-of-completion approach.
c. straight-line approach.
d. accelerated amortization approach.
*75. Capitalized
costs incurred while developing computer software to be sold should be
amortized using the:
a. lower of the straight-line method or the
percent-of-revenue method.
b. higher of the percent-of-revenue method or
the percent-of-completion method.
c. lower of the percent-of-revenue method or the
percent-of-completion method.
d. higher of the straight-line method or the
percent-of-revenue method.
Multiple Choice
Answers—Conceptual
Multiple Choice—Computational
76. Lynne
Corporation acquired a patent on May 1, 2012. Lynne paid cash of $40,000 to the
seller. Legal fees of $1,000 were paid related to the acquisition. What amount
should be debited to the patent account?
a. $1,000
b. $39,000
c. $40,000
d. $41,000
77. Contreras
Corporation acquired a patent on May 1, 2012. Contreras paid cash of $35,000 to
the seller. Legal fees of $900 were paid related to the acquisition. What
amount should be debited to the patent account?
a. $900
b. $34,100
c. $35,000
d. $35,900
78. Mini
Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini
Corp.’s $5 par value common stock and $90,000 cash. When the patent was
initially issued to Maxi Co., Mini Corp.’s stock was selling at $7.50 per
share. When Mini Corp. acquired the patent, its stock was selling for $9 a
share. Mini Corp. should record the patent at what amount?
a. $102,500
b. $108,750
c. $112,500
d. $90,000
79. Alonzo
Co. acquires 3 patents from Shaq Corp. for a total of $300,000. The patents
were carried on Shaq’s books as follows: Patent AA: $5,000; Patent BB: $2,000;
and Patent CC: $3,000. When Alonzo acquired the patents their fair values were:
Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000. At what amount
should Alonzo record Patent BB?
a. $100,000
b. $200,000
c.
$2,000
d. $225,000
80. Jeff
Corporation purchased a limited-life intangible asset for $150,000 on May 1,
2010. 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, 2012?
a. $
-0-
b. $30,000
c. $40,000
d. $45,000
81. Rich
Corporation purchased a limited-life intangible asset for $270,000 on May 1,
2010. 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, 2012?
a. $
-0-.
b. $54,000
c. $72,000
d. $81,000
82. Thompson
Company incurred research and development costs of $100,000 and legal fees of
$20,000 to acquire a patent. The patent has a legal life of 20 years and a
useful life of 10 years. What amount should Thompson record as Patent
Amortization Expense in the first year?
a. $
-0-.
b. $
2,000.
c. $
6,000.
d.
$12,000.
83. ELO
Corporation purchased a patent for $180,000 on September 1, 2010. It had a
useful life of 10 years. On January 1, 2012, ELO spent $44,000 to successfully
defend the patent in a lawsuit. ELO feels that as of that date, the remaining
useful life is 5 years. What amount should be reported for patent amortization
expense for 2012?
a. $41,200.
b. $40,000.
c. $37,600.
d. $31,200.
84. Danks Corporation purchased a patent for $900,000 on September
1, 2010. It had a useful life of 10 years. On January 1, 2012, Danks spent $220,000
to successfully defend the patent in a lawsuit. Danks feels that as of that
date, the remaining useful life is 5 years. What amount should be reported for
patent amortization expense for 2012?
a. $206,000.
b. $200,000.
c. $188,000.
d. $156,000.
85. The general ledger of Vance Corporation as of December 31, 2012,
includes the following accounts:
Copyrights $ 30,000
Deposits with
advertising agency (will be used to promote goodwill) 27,000
Discount on bonds
payable 70,000
Excess of cost
over fair value of identifiable net assets of
Acquired subsidiary 440,000
Trademarks 90,000
In the preparation of Vance's
balance sheet as of December 31, 2012, what should be reported as total
intangible assets?
a. $530,000.
b. $557,000.
c. $560,000.
d. $587,000.
86. In January, 2008, Findley Corporation purchased a patent for a
new consumer product for $960,000. At the time of purchase, the patent was
valid for fifteen years. Due to the competitive nature of the product, however,
the patent was estimated to have a useful life of only ten years. During 2013
the product was permanently removed from the market under governmental order
because of a potential health hazard present in the product. What amount should Findley charge to expense
during 2013, assuming amortization is recorded at the end of each year?
a. $640,000.
b. $480,000.
c. $96,000.
d. $64,000.
87. Day Company purchased a patent on January 1, 2012 for $600,000.
The patent had a remaining useful life of 10 years at that date. In January of
2013, Day successfully defends the patent at a cost of $270,000, extending the
patent’s life to 12/31/24. What amount of amortization expense would Kerr
record in 2013?
a. $60,000
b. $67,500
c. $72,500
d. $90,000
88. On January 2, 2012, Klein Co. bought a trademark from Royce,
Inc. for $1,200,000. An independent research company estimated that the
remaining useful life of the trademark was 10 years. Its unamortized cost on
Royce’s books was $900,000. In Klein’s 2012 income statement, what amount
should be reported as amortization expense?
a. $120,000.
b. $
90,000.
c. $
60,000.
d. $
45,000.
89. A
company acquires a patent for a drug with a remaining legal and useful life of
six years on January 1, 2011 for $2,100,000. The company uses straight-line amortization
for patents. On January 2, 2013, a new patent is received for a timed-release
version of the same drug. The new patent has a legal and useful life of twenty
years. The least amount of amortization that could be recorded in 2013 is
a. $350,000.
b. $
70,000.
c. $
95,454.
d. $
80,500.
90. Blue
Sky Company’s 12/31/12 balance sheet reports assets of $7,500,000 and
liabilities of $3,000,000. All of Blue Sky’s assets’ book values approximate
their fair value, except for land, which has a fair value that is $450,000
greater than its book value. On 12/31/12, Horace Wimp Corporation paid
$7,650,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp
record as a result of this purchase?
a. $
-0-
b. $150,000
c. $2,700,000
d. $3,150,000
91. Dotel
Company’s 12/31/12 balance sheet reports assets of $12,000,000 and liabilities
of $5,000,000. All of Dotel’s assets’ book values approximate their fair value,
except for land, which has a fair value that is $800,000 greater than its book
value. On 12/31/12, Egbert Corporation paid $12,200,000 to acquire Dotel. What
amount of goodwill should Egbert record as a result of this purchase?
a. $
-0-
b. $
200,000
c. $4,400,000
d. $5,200,000
92. Floyd
Company purchases Haeger Company for $3,200,000 cash on January 1, 2013. The book value of Haeger Company’s net
assets, as reflected on its December 31, 2012 balance sheet is $2,480,000. An analysis by Floyd on December 31, 2012
indicates that the fair value of Haeger’s tangible assets exceeded the book
value by $240,000, and the fair value of identifiable intangible assets
exceeded book value by $180,000. How
much goodwill should be recognized by Floyd Company when recording the purchase
of Haeger Company?
a. $ -0-
b. $720,000
c. $480,000
d. $300,000
93. General
Products Company bought Special Products Division in 2012 and appropriately
recorded $500,000 of goodwill related to the purchase. On December 31, 2013,
the fair value of Special Products Division is $4,000,000 and it is carried on General
Product’s books for a total of $3,400,000, including the goodwill. An analysis
of Special Products Division’s assets indicates that goodwill of $400,000
exists on December 31, 2013. What goodwill impairment should be recognized by
General Products in 2013?
a. $0.
b. $200,000.
c. $50,000.
d. $300,000.
94. During 2012, Bond Company purchased the net assets of May
Corporation for $2,000,000. On the date of the transaction, May had $600,000 of
liabilities. The fair value of May's assets when acquired were as follows:
Current assets $ 1,080,000
Noncurrent assets 2,520,000
$3,600,000
How
should the $1,000,000 difference between the fair value of the net assets
acquired ($3,000,000) and the cost ($2,000,000) be accounted for by Bond?
a. The $1,000,000 difference should be credited
to retained earnings.
b. The $1,000,000 difference should be
recognized as a gain.
c. The current assets should be recorded at
$1,080,000 and the noncurrent assets should be recorded at $1,520,000.
d. A deferred credit of $1,000,000 should be set
up and then amortized to income over a period not to exceed forty years.
95. The following information is available for Barkley Company’s
patents:
Cost $2,580,000
Carrying amount 1,290,000
Expected future
net cash flows 1,200,000
Fair value 975,000
Barkley would record a loss on
impairment of
a. $
90,000.
b. $
315,000.
c. $1,290,000.
d. $1,380,000.
96. Harrel
Company acquired a patent on an oil extraction technique on January 1, 2012 for
$7,500,000. It was expected to have a 10
year life and no residual value. Harrel uses straight-line amortization for
patents. On December 31, 2013, the expected future cash flows expected from the
patent were expected to be $900,000 per year for the next eight years. The present
value of these cash flows, discounted at Harrel’s market interest rate, is
$4,200,000. At what amount should the
patent be carried on the December 31, 2013 balance sheet?
a. $7,500,000
b. $7,200,000
c. $6,000,000
d. $4,200,000
97. Malrom
Manufacturing Company acquired a patent on a manufacturing process on January
1, 2012 for $6,250,000. It was expected to have a 10 year life and no residual
value. Malrom uses straight-line amortization for patents. On December 31,
2013, the expected future cash flows expected from the patent were expected to
be $500,000 per year for the next eight years. The present value of these cash
flows, discounted at Malrom’s market interest rate, is $3,000,000. At what
amount should the patent be carried on the December 31, 2013 balance sheet?
a. $6,250,000
b. $5,000,000
c. $4,000,000
d. $3,000,000
98. Twilight
Corporation acquired End-of-the-World Products on January 1, 2012 for
$8,000,000, and recorded goodwill of $1,500,000 as a result of that purchase.
At December 31, 2012, the End-of-the-World Products Division had a fair value
of $6,800,000. The net identifiable assets of the Division (excluding goodwill)
had a fair value of $5,800,000 at that time. What amount of loss on impairment
of goodwill should Twilight record in 2012?
a. $
-0-
b. $500,000
c. $700,000
d. $1,200,000
99. Jenks
Corporation acquired Linebrink Products on January 1, 2012 for $6,000,000, and
recorded goodwill of $1,125,000 as a result of that purchase. At December 31,
2012, Linebrink Products had a fair value of $5,100,000. The net identifiable
assets of the Linebrink (excluding goodwill) had a fair value of $4,350,000 at
that time. What amount of loss on impairment of goodwill should Jenks record in
2012?
a. $
-0-
b. $375,000
c. $525,000
d. $900,000
100. In
2012, Edwards Corporation incurred research and development costs as follows:
Materials and
equipment $ 90,000
Personnel 130,000
Indirect costs 150,000
$370,000
These
costs relate to a product that will be marketed in 2011. It is estimated that
these costs will be recouped by December 31, 2015. The equipment has no
alternative future use. What is the
amount of research and development costs that should be expensed in 2012?
a. $0.
b. $220,000.
c. $280,000.
d. $370,000.
101. Hall
Co. incurred research and development costs in 2013 as follows:
Materials used in research and development projects $ 450,000
Equipment acquired
that will have alternate future uses in future research
and development projects 3,000,000
Depreciation for
2013 on above equipment 500,000
Personnel costs of
persons involved in research and development projects 750,000
Consulting fees
paid to outsiders for research and development projects 300,000
Indirect costs
reasonably allocable to research and development projects
225,000
$5,225,000
The
amount of research and development costs charged to Hall's 2013 income
statement should be
a. $1,700,000.
b. $2,000,000.
c. $2,225,000.
d. $4,700,000.
102. Loazia Inc. incurred the
following costs during the year ended December 31, 2013:
Laboratory research aimed at discovery of new knowledge $230,000
Costs of testing
prototype and design modifications 45,000
Quality control
during commercial production, including routine testing
of products 270,000
Construction of
research facilities having an estimated useful life of
6 years but no alternative future use 360,000
The total amount to be
classified and expensed as research and development in 2013 is
a. $605,000.
b. $905,000.
c. $635,000.
d. $335,000.
103. MaBelle
Corporation incurred the following costs in 2012:
Acquisition of R&D equipment
with a useful life of
4 years in R&D projects $600,000
Start-up costs
incurred when opening a new plant 140,000
Advertising
expense to introduce a new product 700,000
Engineering
costs incurred to advance a product to full
production stage 500,000
What amount should MaBelle record as
research & development expense in 2012?
a. $
650,000
b. $
740,000
c. $1,100,000
d. $1,240,000
104. Leeper
Corporation incurred the following costs in 2012:
Acquisition of R&D equipment
with a useful life of
4 years in R&D projects $800,000
Cost of making
minor modifications to an existing product 140,000
Advertising
expense to introduce a new product 700,000
Engineering costs
incurred to advance a product to full
production stage 750,000
What amount should Leeper record as
research & development expense in 2012?
a. $
950,000
b. $
940,000
c. $1,450,000
d. $1,640,000
105. Platteville
Corporation has the following account balances at 12/31/12:
Amortization expense $ 30,000
Goodwill 420,000
Patent, net of
$90,000 amortization 210,000
What amount should Platteville report for
intangible assets on the 12/31/12 balance sheet?
a. $210,000
b. $300,000
c. $630,000
d. $660,000
*106. Shangra-La
Company incurred $2,000,000 ($500,000 in 2011 and $1,500,000 in 2012) to
develop a computer software product. $600,000 of this amount was expended
before technological feasibility was established in early 2012. The product
will earn future revenues of $4,000,000 over its 5-year life, as follows: 2012
– $1,000,000; 2013 – $1,000,000; 2014 – $800,000; 2015 – $800,000; and 2016 –
$400,000. What portion of the $2,000,000 computer software costs should be
expensed in 2012?
a. $350,000
b. $400,000
c. $450,000
d. $1,500,000
*107. Logan
Company incurred $4,000,000 ($1,100,000 in 2011 and $2,900,000 in 2012) to
develop a computer software product. $1,200,000 of this amount was expended
before technological feasibility was established in early 2012. The product
will earn future revenues of $8,000,000 over its 5-year life, as follows: 2012
– $2,000,000; 2013 – $2,000,000; 2014 – $1,600,000; 2015 – $1,600,000; and 2016
– $800,000. What portion of the $4,000,000 computer software costs should be
expensed in 2012?
a. $700,000.
b. $750,000.
c. $800,000.
d. $2,900,000.
*108. Geller
Inc. incurred $700,000 of capitalizable costs to develop computer software
during 2012. The software will earn total revenues over its 4-year life as
follows: 2012 - $400,000; 2013 - $500,000; 2014 - $600,000; and 2015 -
$500,000. What amount of the computer software costs should be expensed in
2012?
a. $700,000
b. $140,000
c. $175,000
d. $245,000
*109. Tripiani
Inc. incurred $800,000 of capitalizable costs to develop computer software
during 2012. The software will earn total revenues over its 5-year life as
follows: 2012 - $500,000; 2013 - $600,000; 2014 - $600,000; 2015 - $200,000;
and 2016 - $100,000. What amount of the computer software costs should be expensed
in 2012?
a. $200,000
b. $160,000
c. $180,000
d. $266,667
*110. Tripiani
Inc. incurred $900,000 of capitalizable costs to develop computer software
during 2012. The software will be used internally over its 5-year life. What
amount of the computer software costs should be expensed in 2012?
a. $900,000
b. $180,000
c. $202,500
d. $300,000
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