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Exam 12: Intangibles

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Question 51

Multiple Choice

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GAAP requires that research and development costs be

A) capitalized
B) expensed as incurred
C) accumulated until the existence of future benefits is determined
D) expensed in part and capitalized in part

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Question 52

Multiple Choice

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Burger Co. incurred the following costs during 2013 in the development and production of a new product: How much should be included in R&D expense for 2013?

A) $120,000
B) $630,000
C) $750,000
D) $700,000

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Question 53

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On January 1, 2014, Sally, Inc. bought a patent for $100,000. There were ten years left of the patent's legal life. On July 1, 2016, the company successfully defended the patent in court at a cost of $30,000. Required: Compute the amount of patent amortization expense for 2016. Assume Sally calculates amortization to the nearest month and uses the straight-line method.

Identifiable intangible assets would include all of the following except

At the date of purchase, materials, equipment, facilities, and intangibles purchased from others that have no alternative future uses in research and development or other activities should be

What factors should a company consider when estimating the useful life of an intangible asset?

Certain activities are listed below. a.Testing a new type of machine to evaluate its potential usefulness in production b.Engineering follow-through in an early phase of commercial production c.Totalcost of an R&D building-No alternative use d.Salary of director of R&D e.Current period depreciation on a building housing R&D activities (alternative future use) f.General and administrative costs reasonably allocated to R&D projects g.Patent acquired solely for use in a specific R&D project Required: List by letter the activities that would be considered in determining R&D costs.

Trademarks are considered to have an indefinite life and are therefore not subject to amortization.

Which statement about negative goodwill is true?

Costs for which of the following activities should not be included in research and development (R&D) ?

IFRS and GAAP differ in the application of the fair value concept for impairment tests applied to intangible assets. Required: Describe the fair value concept as it is applied for impairment tests in IFRS and GAAP, highlighting the differences.

Which of the following statements concerning intangibles is true?

The Jessie Company acquired a competitor company in January 2015. When Jessie's accountant recorded the purchase, she correctly recorded an amount for goodwill based on the expectation of the acquired company's earning a rate of return on its assets that was in excess of the industry's rate of return. In fact, the acquired company doubled the expected rate of return in 2015 and 2016. As a result of these increased earnings, in early 2017 the president of the Jessie Company asked the company's accountant to increase the amount recognized as goodwill. Required: a.Define the term "goodwill." In addition, discuss several possible factors that might contribute to a company having goodwill. b.Discuss the accounting treatment under current GAAP for goodwill that is internally developed. Discuss the rationale for this treatment. c.Discuss the accounting treatment under current GAAP for goodwill that is acquired through an external transaction. d.Discuss the appropriateness of the president's request to increase the recorded amount of goodwill.

The amortization period for a patent is

Which of the following is not required to be disclosed in an entity's financial statements or accompanying footnotes?

Based on GAAP, most software development costs are likely to be

Costs for which of the following activities would not be included as part of research and development (R&D) costs?

In March of 2014, Marian Corp. applied for a trade name. Legal costs associated with the application were $25,000. At the time of filing the application, the company projected extra annual income to be generated through having the trade name to be $100,000. On Feb. 5, 2016, the company incurred $20,000 in an unsuccessful defense of the trade name. Required: a.What is the amount of income or expense associated with the trade name for the year 2014? For the year 2015? For the year 2016? b.What is the accounting rationale for the amounts recorded in each year?

What characteristics do Intangible and tangible noncurrent assets have in common?

During 2013, Debbie Company incurred $240,000 in legal fees in defending a patent with a carrying value of $4,500,000 against an infringement. Debbie's lawyers were not successful with the defense of the patent. The legal fees should be