Intermediate Accounting UPDATED
Questions and CORRECT Answers
Which of the following in NOT a characteristic of intangible assets? - CORRECT ANSWER-
✔✔They are all shbject to amortization
Expensing all R&D costs associated with internally created intangible assets results in -
CORRECT ANSWER- ✔✔Understating assets and overstating expenses
Which of the following is a factor to be considered in determining a limited-life intangible
asset's useful life? - CORRECT ANSWER- ✔✔All of these answer choices are correct
A purchased limited-life intangible asset ____ amortized and is impairment tested using
_____ - CORRECT ANSWER- ✔✔Is; the recoverability test and then the fair value test
Construction permits are - CORRECT ANSWER- ✔✔Contract-related intangible assets
Which of the following is NOT one of the major categories of intangibles? - CORRECT
ANSWER- ✔✔Financing-related
Marketing-related intangibles would include - CORRECT ANSWER- ✔✔a brand name
The difference between the price paid to acquire another company and the fair market value
of that company's net assets can be referred to as - CORRECT ANSWER- ✔✔all of these
answer choices are correct
The two principal types of patents issued by the U.S. Patent and Trademark Office are -
CORRECT ANSWER- ✔✔process patents and product patents
On January 1, 2014 Bumper Corp. acquires a customer list for $400,000. Bumper estimates
that this customer list will generate value for at least 5 years. At the end of 3 years, Bumper
plans to sell the customer list to another company for $62,500. On Bumper's income
statement for the year ended December 31, 2014, how much amortization expense should it
report? - CORRECT ANSWER- ✔✔$112,500
, Tiburon Corporation purchased a patent for $1,850,000 on November 20, 2012. It has a
remaining legal life of 11 years. Tiburon estimates that the remaining useful life of the patent
is useful life of 15 years. What balance will be reported on the December 21, 2014 balance
sheet for the patent (if necessary, round your answer to the nearest dollar)? - CORRECT
ANSWER- ✔✔$1,499,621
Which of the following costs of goodwill should be amortized over their estimated useful
lives? - CORRECT ANSWER- ✔✔NO ; NO
St. Sebastian Company and A. Jamison Company were combined in a purchase transaction.
St. Sebastian was able to acquire Jamison at a bargain price. The fair market value of
Jamison's net assets exceeded the price paid by St. Sebastian to acquire the company. Proper
accounting treatment by St. Sebastian is to report the excess fair value over purchase price as
- CORRECT ANSWER- ✔✔a gain
Truffle INc. acquired a patent on January 1, 2011 for $7,800,000. It was expected to have a
10 year life and no residual value. Truffle uses straight-line amortization for its patents. On
December 31, 2014, the expected future cash flows from the patent are $518,000 per year for
the next six years. The present value of these cash flows, discounted at Truffle's market
interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on
Truffle's 2014 income statement? - CORRECT ANSWER- ✔✔$2,560,000
The impairment rule for goodwill involves how many steps? - CORRECT ANSWER- ✔✔2
Which of the following principles best describes the current method of accounting for
research and development costs - CORRECT ANSWER- ✔✔Immediate recognition as an
expense
Which of the following research and development costs may be capitalized? - CORRECT
ANSWER- ✔✔Research and development equipment to be used on current and future
projects
The presentation of intangible assets in the financial staments - CORRECT ANSWER-
✔✔All of these answer choices are correct
Questions and CORRECT Answers
Which of the following in NOT a characteristic of intangible assets? - CORRECT ANSWER-
✔✔They are all shbject to amortization
Expensing all R&D costs associated with internally created intangible assets results in -
CORRECT ANSWER- ✔✔Understating assets and overstating expenses
Which of the following is a factor to be considered in determining a limited-life intangible
asset's useful life? - CORRECT ANSWER- ✔✔All of these answer choices are correct
A purchased limited-life intangible asset ____ amortized and is impairment tested using
_____ - CORRECT ANSWER- ✔✔Is; the recoverability test and then the fair value test
Construction permits are - CORRECT ANSWER- ✔✔Contract-related intangible assets
Which of the following is NOT one of the major categories of intangibles? - CORRECT
ANSWER- ✔✔Financing-related
Marketing-related intangibles would include - CORRECT ANSWER- ✔✔a brand name
The difference between the price paid to acquire another company and the fair market value
of that company's net assets can be referred to as - CORRECT ANSWER- ✔✔all of these
answer choices are correct
The two principal types of patents issued by the U.S. Patent and Trademark Office are -
CORRECT ANSWER- ✔✔process patents and product patents
On January 1, 2014 Bumper Corp. acquires a customer list for $400,000. Bumper estimates
that this customer list will generate value for at least 5 years. At the end of 3 years, Bumper
plans to sell the customer list to another company for $62,500. On Bumper's income
statement for the year ended December 31, 2014, how much amortization expense should it
report? - CORRECT ANSWER- ✔✔$112,500
, Tiburon Corporation purchased a patent for $1,850,000 on November 20, 2012. It has a
remaining legal life of 11 years. Tiburon estimates that the remaining useful life of the patent
is useful life of 15 years. What balance will be reported on the December 21, 2014 balance
sheet for the patent (if necessary, round your answer to the nearest dollar)? - CORRECT
ANSWER- ✔✔$1,499,621
Which of the following costs of goodwill should be amortized over their estimated useful
lives? - CORRECT ANSWER- ✔✔NO ; NO
St. Sebastian Company and A. Jamison Company were combined in a purchase transaction.
St. Sebastian was able to acquire Jamison at a bargain price. The fair market value of
Jamison's net assets exceeded the price paid by St. Sebastian to acquire the company. Proper
accounting treatment by St. Sebastian is to report the excess fair value over purchase price as
- CORRECT ANSWER- ✔✔a gain
Truffle INc. acquired a patent on January 1, 2011 for $7,800,000. It was expected to have a
10 year life and no residual value. Truffle uses straight-line amortization for its patents. On
December 31, 2014, the expected future cash flows from the patent are $518,000 per year for
the next six years. The present value of these cash flows, discounted at Truffle's market
interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on
Truffle's 2014 income statement? - CORRECT ANSWER- ✔✔$2,560,000
The impairment rule for goodwill involves how many steps? - CORRECT ANSWER- ✔✔2
Which of the following principles best describes the current method of accounting for
research and development costs - CORRECT ANSWER- ✔✔Immediate recognition as an
expense
Which of the following research and development costs may be capitalized? - CORRECT
ANSWER- ✔✔Research and development equipment to be used on current and future
projects
The presentation of intangible assets in the financial staments - CORRECT ANSWER-
✔✔All of these answer choices are correct
