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Front 1

When an intangible asset is acquired in an exchange transaction, initial recognition is at the

Back 1

Fair value of the more clearly evident of the consideration given or the asset acquired.

Front 2

Externally acquired intangibles other than goodwill are initially recorded

Back 2

At acquisition costs plus and incidentals

Front 3

Internally developed intangibles other than goodwill are initially recorded

Back 3

At the amount of incindentals costs (legal fees)only. R&D costs are expensed as incurred.

Front 4

Organization and start up costs are

Back 4

Under Tax Code: Capitalized and amortized over a period of not less than 15 years

Financial Accounting Purposes: All expensed

Front 5

Which of the following expenditures qualifies for asset capitalization?

A.Salaries of engineering staff developing a new product.

B.Costs of testing a prototype and modifying its design.

C.Cost of materials used in prototype testing.

D.Legal costs associated with obtaining a patent on a new product.

Back 5

Answer (D) is correct.
Patents may be purchased or developed internally. The initial capitalized cost of a purchased patent is normally the fair value of the consideration given, that is, its purchase price plus incidental costs, such as registration and attorney’s fees. Internally developed patents are less likely to be capitalized because related R&D costs must be expensed when incurred. Thus, only relatively minor costs can be capitalized, for example, patent registration fees and legal fees.

Front 6

On an intangible asset with indefinite life, impairment is

Back 6

Carrying amount - Fair value.

The Undiscounted future inflows is not considered

Front 7

The amortization period for a patent is

Back 7

The shorter of the useful life of legal life remaining

Front 8

Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if

A.An active market exists for the intangible asset.

B.The intangible asset is a monetary asset.

C.The cost of the intangible asset can be measured reliably.

D.The useful life of the intangible asset can be reliably determined.

Back 8

Answer (A) is correct.
An intangible asset is carried at cost minus any accumulated amortization and impairment losses, or at a revalued amount. The revaluation model is similar to that for items of PPE (initial recognition of an asset at cost). However, fair value must be determined based on an active market.

Front 9

Successful litigation costs are capitalized/Expensed?

UnSuccessful litigation costs are capitalized/Expensed?

Back 9

Successful litigation costs are capitalized

UnSuccessful litigation costs are Expensed

Front 10

Which of the following costs of goodwill should be capitalized and amortized?

Maintaining Goodwill

Developing Goodwill

Back 10

Goodwill arising from a business combination must be capitalized. However, amortization of goodwill is prohibited. Moreover, the cost of developing, maintaining, or restoring intangible assets (including goodwill) that (1) are not specifically identifiable, (2) have indeterminate useful lives, or (3) are inherent in a continuing business and related to an entity as a whole are expensed as incurred

Front 11

An entire acquired entity is sold. The goodwill remaining from the acquisition should be

A.Charged to retained earnings of the current period.

B.Charged to retained earnings of prior periods.

C.Expensed in the period sold.

D.Included in the carrying amount of the net assets sold.

Back 11

Answer (D) is correct.
When a reporting unit is disposed of in its entirety, goodwill of that reporting unit (to the extent an impairment loss has not been recognized) is included in the carrying amount of the reporting unit to determine the gain or loss on disposal. Consequently, the unimpaired goodwill of each reporting unit of the acquired entity is included in the total carrying amount of that entity.

Front 12

R&D expenses include

Back 12

1. R&D performed under contract by others

2. Design, construction, and testing of prototypes

3. Testing in search for new products.

Front 13

Which of the following is a research and development cost?

A.Research and development performed under contract for others.

B.Market research related to a major product for the company.

C.Development or improvement of techniques and processes.

D.Offshore oil exploration that is the primary activity of a company.

Back 13

C.Development or improvement of techniques and processes.

Front 14

Research is defined as planned search or critical investigation. It is aimed at discovery of new knowledge with the hope that it will be useful in

Back 14

(1) developing a new product, service, process, or technique or (2) in bringing about a significant improvement in an existing product, service, process, or technique.

Front 15

During the current year, Lyle Co. incurred $204,000 of research and development costs in its laboratory to develop a patent that was granted on July 1. Legal fees and other costs associated with registration of the patent totaled $41,000. The estimated useful life of the patent is 10 years. What amount should Lyle capitalize for the patent on July 1?

Back 15

R&D costs are required to be expensed as they are incurred. Legal fees and registration fees are excluded from the definition of R&D. Thus, the $41,000 in legal fees and other costs associated with the registration of the patent should be capitalized. The $204,000 in R&D costs should be expensed.

Front 16

Equipment purchased for current and future projects

Equipment purchased for current projects only

Are these both R&D expense

Back 16

Equipment purchased for current projects only is R&D expense

Equipment purchased for current and future projects should be capitalized and depreciated

Front 17

Equipment purchased for current and future projects $100,000

Equipment purchased for current projects only

200,000

Research and development salaries for current project 400,000

Equipment has a 5-year life and is depreciated using the straight-line method. What amount should Brand record as depreciation for research and development projects at December 31?

Back 17

20,000

R&D costs must be expensed as incurred. The costs of equipment acquired for a particular project and having no alternative future uses and salaries of personnel engaged in R&D are R&D costs. They are expensed when incurred. The costs of equipment acquired for R&D and having alternative future uses are not R&D costs. They are capitalized as tangible assets and depreciated accordingly. Thus, the recorded depreciation is $20,000 ($100,000 ÷ 5 years).

Front 18

R&D costs must be expensed as incurred. But this rule does not apply to

Back 18

(1) R&D activities conducted for others or (2) assets acquired in a business combination that are used in R&D activities

Front 19

Laboratory research aimed at discovery of new knowledge $75,000

Design of tools, jigs, molds, and dies involving new technology 22,000

Quality control during commercial production, including routine testing 35,000

Equipment acquired 2 years ago, having an estimated useful life of 5 years with no salvage value, used in various R&D projects 150,000

Research and development services performed by Stone Co. for Metal, Inc. 23,000

Research and development services performed by Metal, Inc., for Clay Co. 32,000

What amount of research and development expenses should Metal report in its current-year income statement?

Back 19

150,000 The depreciation on the equipment used in R&D projects is considered an R&D expense in the current period.

Front 20

Software to be marketed should be _______ before technological feasibility, __________ after technological feasibility, and ____________ for costs incurred to prepare the product for sale

Back 20

Expensed, Capitalized, inluded in inventory.

Front 21

For software to be marketed annual amortization is the greater of

Back 21

a) Total capitalized costs time the revenue ratio ( annual gross software revenue/ total projected gross revenue) or b) Total capitalized cost divided by the estimated economic life of the software (straightline)

Front 22

Software to be used internally

Costs expensed are

Back 22

1) costs incurred during prelim project stage and 2) Costs incurred for training and maintenance

Front 23

Software to used internally

Costs capitalized are

Back 23

1) costs incurred durring the application development stage (external direct costs, payroll associated withteh project, interest costs associated with the project).

Front 24

Software to used internally

Annual amortization is determined on

Back 24

a straight line basis

Front 25

Direct response advertising costs should be capitalized if

Back 25

a) The primary purpose is to generate sales from customers who specifically respond to the advertising and b) probable future benefits result.

Front 26

Deficits accumulated during the development stage of an entity should be

Back 26

Reported as a part of equity.

Front 27

Financial reporting by a development stage enterprise differs from financial reporting for an established operating enterprise in regard to disclosures

Back 27

Only. A development stage enterprise must present financial statements in conformity with GAAP together with certain additional information accumulated since the inception. Cumulative net losses must be disclosed in the equity section of the balance sheet, cumulative amounts of revenue and expense in the income statement, cumulative amounts of cash inflows and outflows in the statement of cash flows, and information about each issuance of stock in the statement of equity.

Front 28

A statement of cash flows for a development stage entity

Back 28

Is the same as that of an established operating entity and, in addition, shows cumulative amounts from the entity’s inception.

Front 29

Research is defined as planned search or critical investigation. It is aimed at discovery of new knowledge with the hope that it will be useful in

Development is defined as

Back 29

(1) developing a new product, service, process, or technique or (2) in bringing about a significant improvement in an existing product, service, process, or technique.

a translation of research findings or other knowledge into a plan or design for a new or improved product or process.

Front 30

An impairment test for a nonamortized intangible asset does not consider recoverability

TorF

Back 30

T

A nonamortized intangible asset must be reviewed for impairment at least annually. It is tested more often if events or changes in circumstances suggest that the asset may be impaired. This impairment test does not consider recoverability.

Front 31

In the calculation of the gain or loss on disposal of a reporting unit, goodwill is included as part of its carrying amount.

T or F

Back 31

T

In the calculation of the gain or loss on disposal of a reporting unit, goodwill is included as part of its carrying amount.

Front 32

Costs of software to be marketed are subject to three treatments:

Back 32

Expensed as incurred

Capitalized as computer software costs

Included in inventory

Front 33

Costs incurred to produce the product for sale (duplication of software, training materials, packaging) are capitalized/Expensed as inventory

Back 33

Capitalized

Front 34

Costs of software for internal use in the preliminary project stage are expensed as incurred or capitalized?

Back 34

expensed as incurred.