Multiple Choice Questions-Amortization and valuation of intangibles.
1. Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to
a. Patents and amortized over the legal life of the patent.
b. Legal fees and amortized over 5 years or less.
c. Expenses of the period.
d. Patents and amortized over the remaining useful life of the patent.
2. The intangible assed goodwill may be
a. Capitalized only when purchased.
b. Capitalized either when purchased or created internally.
c. Capitalized only when created internally.
d. Written off directly to retained earnings.
3. How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?
a. Must be capitalized when incurred and then amortized over their estimated useful lives.
b. Must be expensed in the period incurred.
c. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.
d. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.
4. The general ledger or Younger Corporation as of December 31, 2007, includes the following accounts:
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Copyrights
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$ 20,000
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Deposits with advertising agency (will be used to promote goodwill)
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13,500
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Discount on bonds payable
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33,750
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Excess of cost over fair value of identifiable net assets of
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|
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Acquired subsidiary
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245,000
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Trademarks
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45,000
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In the preparation of Younger's balance sheet as of December 31, 2007, what should be reported as total intangible assets?
a. $357,250.
b. $323,500.
c. $310,000.
d. $290,000.
5. In 2007, Edwards Corporation incurred research and development costs as follows:
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Materials and equipment
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$100,000
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Personnel
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120,000
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Indirect costs
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150,000
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|
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$370,000
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These costs relate to a product that will be marketed in 2007. It is estimated that these costs will be recouped by December 31, 2010. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2007?
a. $0.
b. $220,000.
c. $270,000.
d. $370,000.
6. On January 1, 2003, Watts Company purchased a copyright for $600,000, having an estimated useful life of 16 years. In January 2007, Watts paid $90,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2007, should be:
a. $0
b. $37,500
c. $43,125
d. $45,000
7. Ely Co. bought a patent from Backo Corp. on January 1, 2007, for $180,000. An independent consultant retained by Ely estimated that the remaining useful life is 30 years. Its unarmortized cost on Backo's accounting records was $90,000; the patent had been amortized for 5 years by Backo. How much should be amortized for the year ended December 31, 2007?
a. $0
b. $3,000
c. $6,000
d. $12,000
8. In January, 2007, Sanford Corporation purchased a patent for a new consumer product for $1,200,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2012 the product was permanently removed from the market under government order because of a potential health hazard present in the product. What amount should Sanford charge to expense during 20012, assuming amortization is the end of each year?
a. $800,000
b. $600,000
c. $120,000
d. $80,000