Acc206 Quiz Ch 12

Front 1

characteristics of intangible assets

Back 1

lack physical existence

not financial instruments

will generate cash flows with one year

normally classified as long term asset

Front 2

5 common types of intangibles

Back 2

patents

copyrights

franchises/ licenses

trademarks/ trade names

goodwill

Front 3

manner intangibles are acquired

Back 3

purchased (capitalized)

internally created (expensed)

Front 4

examples of purchased intangibles

Back 4

purchase price, legal fees, other expenses

Front 5

valuation of purchased intangibles

Back 5

recorded at cost

includes all costs necessary to make the intangible ready for its intended use

Front 6

valuation of internally created intangibles

Back 6

generally expensed

only capitalize direct costs incurred in developing the intangible, such as legal costs

Front 7

if R&D costs are completely expensed, there will be an overstatement of _______ and an understatement of _______

Back 7

expenses

assets

Front 8

how long asset will be useful to the business

Back 8

useful life

Front 9

amortization =

Back 9

cost less residual value

Front 10

indefinite life intangibles are amortized (y/n) and why

Back 10

NO

b/c they are expected to generate profits that will last forever

Front 11

for amortization of limited life intangibles, the lesser of _____ and _____ life should be used

Back 11

useful

legal

Front 12

journal entry to record amortization

Back 12

Amortization Expense

Asset (or Accum. Amortization)

Front 13

useful life should reflect the periods over which...

Back 13

the asset will contribute to cash flows

Front 14

amortization cannot occur for longer than the ______ life

Back 14

legal

Front 15

companies must test both limited and indefinite life intangibles for ______

Back 15

impairment

Front 16

impairment test for limited life intangibles

Back 16

1. recoverability test

2. fair value test

Front 17

impairment test for indefinite life intangibles

Back 17

1. fair value test

Front 18

purchased limited life intangibles should be (capitalized/expensed)

Back 18

capitalized

Front 19

purchased indefinite life intangibles should be (capitalized/expensed)

Back 19

capitalized

Front 20

internally created limited life intangibles should be (capitalized/expensed)

Back 20

expensed (except for direct costs, ie. legal costs)

Front 21

internally created indefinite life intangibles should be (capitalized/expensed)

Back 21

expensed (except for direct costs, ie. legal costs)

Front 22

6 categories of intangible assets

Back 22

marketing related

customer related

artistic related

contract related

technology related

goodwill

Front 23

examples of marketing related intangible assets

Back 23

trademarks,

trade names,

internet domain names,

non competition agreements,

newspaper mastheads

Front 24

US trademarks/ trade names have legal protection for...

Back 24

indefinite number of 10 year renewal periods

Front 25

marketing related intangible assets...

capitalize?

amortize?

Back 25

capitalize acquisition costs

no amortization

Front 26

examples of customer related intangible assets

Back 26

- customer lists

- order or production backlogs

- contractual and non contractual customer relationships

Front 27

customer related intangible assets...

capitalize?

amortize?

Back 27

capitalize acquisition costs

amortized to expense over useful life

Front 28

journal entry to record the purchase of an intangible asset

Back 28

intangible asset

cash

Front 29

examples of artistic related intangible assets

Back 29

plays

literary works

musical works

pictures

photographs

video and audiovisual material

Front 30

artistic related intangible assets...

capitalize?

amortize?

Back 30

capitalize costs of acquiring and defending

amortized to expense over useful life

Front 31

copyright is granted for how long?

Back 31

the life of the creator plus 70 years

Front 32

examples of contract related intangible assets

Back 32

franchise

licensing agreements

construction permits

broadcast rights

service/supply contracts

Front 33

franchise with an indefinite life should be carried at _____ and not _____

Back 33

cost

amortized

Front 34

franchise/license with a limited life should be _____

Back 34

amortized to expense over the life of the franchise

Front 35

examples of technology related intangible assets

Back 35

patented technology and trade secrets granted by the US Patent and Trademark Office

Front 36

what intangible asset gives holder exclusive use for a period of 20 years?

Back 36

patent

Front 37

technology related intangible assets...

capitalize?

amortize?

Back 37

capitalize costs of purchasing a patent

amortize shorter of legal life or useful life

***expense R&D costs in developing the patent

Front 38

goodwill is only recorded when...

Back 38

an entire business is purchased

during mergers and acquisitions

Front 39

goodwill is measured as the excess of...

Back 39

cost of the purchase over the FMV of the identifiable net assets purchased

Front 40

should internally created goodwill be capitalized?

Back 40

no

Front 41

net assets =

Back 41

assets - liabilities

Front 42

conceptually, represents the future economic benefits arising from the other asserts acquired in a business combination that are not individually identified and separately recognized

Back 42

goodwill

Front 43

what is the most intangible of all intangibles?

Back 43

goodwill

Front 44

goodwill =

Back 44

purchase price - FMV of net assets

Front 45

journal entry to record acquisition of company, including goodwill

Back 45

assets

goodwill

liabilities

cash

Front 46

should goodwill write off be amortized?

Back 46

no

Front 47

goodwill is considered to have a(n) definite/ indefinite life

Back 47

an indefinite life

Front 48

only adjust carrying value when goodwill is ______

Back 48

impaired

Front 49

purchase price = FMV net assets

Back 49

no goodwill

Front 50

purchase price > FMV net assets

Back 50

goodwill

Front 51

purchase price < FMV net assets

Back 51

bargain purchase

Front 52

bargain purchase amount is recorded as a _____ by the purchaser

Back 52

gain

Front 53

if the sum of the expected future net cash flows (undercounted) is less than the carrying amount of the net asset, an impairment has occurred

Back 53

recoverability test

Front 54

the impairment loss is the amount by which the carrying amount of the asset exceeds the fair value of the asset

Back 54

fair value test

Front 55

loss on an impairment is reported as

Back 55

part of income from continuing operations under

"other expenses and losses" section

Front 56

journal entry to record a loss on impairment

Back 56

loss on impairment

intangible asset

Front 57

2 step process: impairment of goodwill

Back 57

1. if FV < BV (net assets w/ goodwill), then step 2

2. if FV goodwill < BV goodwill, then impaired

Front 58

FV (implied) goodwill =

Back 58

FV of reporting unit - net identifiable assets, excluding goodwill

Front 59

impairment test for goodwill

Back 59

1. fair value test on reporting unit

2. fair value test on implied (FV) goodwill

Front 60

companies must ______ all R&D costs when incurred, unless _____

Back 60

expense

it has future alternative use

Front 61

planned search or critical investigation aimed at discovery of new knowledge

Back 61

research activities

Front 62

translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or use

Back 62

development activities

Front 63

costs associated with R&D activities

Back 63

materials, equipment, facilities

personnel

purchased intangibles

contract services

indirect costs

Front 64

costs similar to R&D costs

Back 64

start up costs for a new operation

initial operating losses

advertising costs

computer software costs