Intermediate Accounting Final Exam Questions With 100% Correct Answers

Intermediate Accounting Final Exam Questions With 100% Correct Answers Neither internally generate goodwill nor patents will be reported on the balance sheet - answerFalse Unlimited-life intangibles such as trademarks and tradenames are not amortized by systematic charges to expense but are impairment tested annually. - answerTrue The cost of a patent is amortized over its remaining legal life or its remaining useful life, whichever is longer. - answerFalse Goodwill recorded in connection with a business acquisition is calculated as the excess of the purchase price over the fair value of the acquired company's net assets. - answerTrue Florida Corporation acquired a patent and paid cash of $1,035,000 to the seller. Legal fees of $11,500 were paid in connection with the acquisition. Florida will debit the patent accounts for - answer$1,046,500 ($1,035,000 + $11,500) Okie Company incurred research and development costs of $1,900,000 and legal fees of $45,000 to develop a patent. The patent was effective on January 1, 2020. It had legal life of 20 years and a useful life of 5 years. What will be reported on the December 31, 2022 (the second year of asset's life) for the patent? - answer$27,000 $45,000 / 5 years = $9,000 1st year = $45,000 - $9,000 =$36,000 2nd year = $36,000 - $9,000 = $27,000 Limited-life intangibles such as patents are amortized by systematic charges to expense over their useful lives. - answerTrue Starbucks Corporation acquired a patent on May 1, 2022, and paid cash of $35,000 to the seller. Legal fees of $1,500 were paid related to the acquisition. What amount should be debited to the patent account? - answer$36,500 ($35,000 + $1,500) When a patent is purchased, its cost should be amortized over the remaining legal life of the patent. - answerFalse When a company is acquired, which of the following intangible assets, unrecorded on the acquired company's books, might be recorded in addition to goodwill on the books of the buying company? - answerA brand name. A patent. A customer list. Which is a type of technology-related intangible asset? - answerPatent When intangible assets are internally generated, they are initially recorded at fair value. - answerFalse Internally generated goodwill is not capitalized in the accounts. - answerTrue The general ledger of Dunkin Donuts Corporation as of December 31, 2022, includes the following accounts: Copyrights $50,000 Deposits with advertising agency (will be used to promote goodwill) 27,000 Discount on bonds payable 70,000 Excess of cost over fair value of identifiable net assets of Acquired subsidiary 480,000 Trademarks 90,000 In the preparation of Dunkin Donuts' balance sheet as of December 31, 2022, what should be reported at total intangible assets? - answer$620,000 ($50,000 + $480,000 + $90,000) Common Types of Intangible Assets - answer-patents -copyrights -franchises or licenses -trademarks -trade names -goodwill Tik-Tok Comapny incurred research and development costs of $100,000 and legal fees of $40,000 to develop a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Tik-Tok record as Patent Amortization Expense in the first year? - answer$4,000 ($40,000 / 10 = $4,000) Tesla Corporation purchased a patent for $405,000 on September 1, 2020. It had a useful life of 10 years. On January 1, 2022, Tesla spent $99,000 to successfully defend the patent in a lawsuit. Tesla feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2023? - answer$90,000 $405,000 / 10 years = $40,500 x (4/12) = $13,500 $405,000 - $13,500 - $40,500 = $351,000 $351,000 + $99,000 = $450,000 $450,000 / 5 years = $90,000 Texaco Corporation purchased a trademark for $4,050,000 on July 1, 2018. On January 1, 2022, Texaco spent $1,555,000 to successfully defend the trademark in a lawsuit. What will be reported for the trademark on the December 21, 2022 balance sheet? - answer$5,605,000 ($4,050,000 + $1,555,000) Ariel Corporation has collected the following information as of December 31, 2020 regarding certain accounts and balances: Patents $1,000,000 Deposits with advertising agency 17,000 Premium on bonds payable 70,000 Customer List 45,000 Goodwill 180,000 Note Receivable 100,000 Trademarks 9,000 What should be reported as total intangible assets on Ariel Corporation's balance sheet as of December 31, 2020? - answer$1,234,000 ($1,000,000 + $45,000 + $180,000 + $9,000) When one company is acquired by another, which of the following intangible assets, unrecorded on the acquired company's books, would not be recorded separately on the books of the buying company? - answerMarket Share