Intermediate Accounting 2 Final Exam questions and verified correct answers

Intangible Assets - correct answer Lack of physical existence, Not financial instruments, Long-term Assets Common Types: Patents, Copy Rights, Franchises, Trademarks, Goodwill Valuation of Intangible Assets - correct answer Companies record at cost when purchased from another company. Cost includes all costs included in getting it ready for intended use. Includes Purchase Price, Legal Fees, and other incidental expenses. Costs of Internally created intangible assets are - correct answer generally expensed. Capitalize Direct costs in developing the intangible assets (legal costs) Different Types of Intangible assets: 6 - correct answer Technology, Marketing, Contract, Customer, Artistic, Goodwill Limited Life - correct answer Amortize and Test for Impairment Cost Less Residual Value Indefinite Life - correct answer Test for Impairment Amortization JE - correct answer First record what you got Ex: Debt Franchises Credit Cash Then Debt Amortization Expense and credit Franchises Account for partial year Goodwill - correct answer Future economic benefits arising in a business combination that are not individually recognized. ENTIRE business must be purchased. Cost if the Purchase-FMV of net assets Goodwill Impairment - correct answer Test Annually 2 Step process Compare FV of reporting unit with BV of Reporting Unit Implied Goodwill = Fair Value- Carrying Amount, net of Goodwill Compare Book Value of Goodwill to implied value of Goodwill When to test for Impairment - correct answer 2 Steps 1) Compare Book Value to Undiscounted Future Cash Flows 2) If Impairment compare book value and fair value