Grade Details

Page:

12
Question :

1.

(TCO C) The cost of an intangible asset includes all of the following except purchase price. legal fees. other incidental expenses. all of these are included.

Student Answer:

Instructor Explanation: Chapter 12

Points Received: Comments:
1740703733 0 MultipleChoice 1740703733

5 of 5

46 MultipleChoice

True 46

2.

Question : Student Answer:

(TCO C) Which of the following is not an intangible asset? Trade name Research and development costs Franchise Copyrights

Instructor Explanation: Chapter 12

Points Received: Comments:
1740703734 0 MultipleChoice 1740703734

5 of 5

47 MultipleChoice

True 47

3.

Question : Student Answer:

(TCO C) The intangible asset goodwill may be capitalized only when purchased. capitalized either when purchased or created internally. capitalized only when created internally.

800. 2010 balance sheet. The book value of Haeger Company’s net assets. ELO feels that as of that date.600.000 cash on January 1.600. the remaining useful life is five years.000 ÷ 10) × 1 1/2] = $76.000 on September 1. ($76. as reflected on its December 31. It had a useful life of ten years. On March 1.written off directly to retained earnings. 2008.000 $180. $18.000. An analysis by Floyd on December 31. 2010 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $60.000 Student Answer: . ELO spent $17. 2010.000 – [($90. $20. Student Answer: Instructor Explanation: Chapter 12. What amount should be reported for patent amortization expense for 2010? $20.500. 2011.800. Question : (TCO C) Floyd Company purchases Haeger Company for $800. $15. 0 of 5 Points Received: Comments: 1740703736 0 MultipleChoice 1740703736 50 MultipleChoice False 50 5. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? $ -0$120.500) ÷ 5 = $18. $90. Instructor Explanation: Chapter 12 Points Received: Comments: 1740703735 0 MultipleChoice 1740703735 5 of 5 48 MultipleChoice True 48 4. Question : (TCO C) ELO Corporation purchased a patent for $90.500 to successfully defend the patent in a lawsuit.500 + $17.000. and the fair value of identifiable intangible assets was equal to book value. is $620.000.

Question : (TCO D) An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's portion of FICA taxes and unemployment taxes. Student Answer: Instructor Explanation: Chapter 13 .000 = $120. $620. and unemployment taxes. (2) a one-year operating cycle. (3) a relatively stable pattern of annual sales. should be reported as part current and part long-term. portion of FICA taxes and any voluntary deductions.000 + $60.000. $800. Any liability for the warranty should be reported as long-term. portion of FICA taxes. and (4) a continuing policy of guaranteeing new products against defects for one year that has resulted in material but rather stable warranty repair and replacement costs. unemployment taxes. portion of FICA taxes. 5 of 5 Points Received: Comments: 1740703737 0 MultipleChoice 1740703737 52 MultipleChoice True 52 6. Student Answer: Instructor Explanation: Chapter 13 Points Received: Comments: 1740703738 0 MultipleChoice 1740703738 0 of 5 53 MultipleChoice False 53 7. should be reported as current. and any voluntary deductions.000 Instructor Explanation: Chapter 12. need not be disclosed.000 = $680. Question : (TCO D) Assume that a manufacturing corporation has (1) good quality control.000.000 – $680.$75.

000. is involved in litigation regarding a faulty product sold in a prior year.000.000 = $300. On January 10. Irey borrowed $1.000 and credit Litigation Liability for $200.Points Received: Comments: 1740703739 0 MultipleChoice 1740703739 0 of 5 54 MultipleChoice False 54 8. 2011 is $0. $800. Debit Litigation Expense for $200. Points Received: Comments: 1740703740 0 MultipleChoice 1740703740 0 of 5 55 MultipleChoice False 55 9.000 additional cash to liquidate $1.700. has $2.000 – $1. If this is the case. Student Answer: Instructor Explanation: Chapter 13.000.000. their attorney estimated that the amount of any payment would be $500. 2010 balance sheet which is issued on March 5. Irey Co. The attorneys estimated that there is a 40% chance of losing. Student Answer: . 2011. What is the required journal entry as a result of this litigation? Debit Litigation Expense for $500.000 and credit Litigation liability for $500.700.000 at one percent above the prime rate for three years.700. 2011. $500. The amount of the short-term notes payable that should be reported as current liabilities on the December 31. 2011. Irey arranged a line of credit with County Bank which allows Irey to borrow up to $1. On February 2. The company has consulted with its attorney and determined that it is possible that they may lose the case.000 of the short-term notes payable.000.000.000 from County Bank and used $300. $300. 2010.700.000. $2.000 of short-term notes payable due on February 14. No journal entry is required. Question : (TCO D) On December 31.000. Question : (TCO D) Tender Foot Inc.000.

Debit Litigation Expense for $300. Inc. no necessary relationship exists between the two rates. issued bonds with a maturity amount of $200.000 and a maturity ten years from date of issue. Points Received: Comments: 1740703741 0 MultipleChoice 1740703741 0 of 5 56 MultipleChoice False 56 10. Student Answer: Instructor Explanation: Chapter 14 Points Received: Comments: 1740703742 0 MultipleChoice 1740703742 5 of 5 62 MultipleChoice True 62 11.000. interest expense in the earlier years will exceed what it would have been had the effective-interest method of amortization been used. not probable. the market and nominal rates coincided. If the bonds were issued at a discount this indicates that the effective yield or market rate of interest exceeded the stated (nominal) rate.000 and credit Litigation Liability for $300. the nominal rate of interest exceeded the market rate. Question : (TCO D) If bonds are initially sold at a discount and the straight-line method of amortization is used. Student Answer: Instructor Explanation: Chapter 14 . Likelihood of loss is only possible. be the same as it would have been had the effective-interest method of amortiza-tion been used. Instructor Explanation: Chapter 13. be less than the stated (nominal) rate of interest. be less than what it would have been had the effective-interest method of amortization been used. Question : (TCO D) Reich.

000. Instructor Explanation: Chapter 14 Points Received: Comments: 1740703744 0 MultipleChoice 1740703744 5 of 5 58 MultipleChoice True 58 13.000 $19.400.000 × 7/12) = $20. increased by accrued interest from May 1 to June 1. and pay interest annually on December 31. The bonds are dated January 1.000 $19. Student Answer: decreased by accrued interest from May 1 to June 1.000 of ten-year. 2010 at 97 plus accrued interest. ($20.000.000 $20.Points Received: Comments: 1740703743 0 MultipleChoice 1740703743 0 of 5 32 MultipleChoice False 32 12.450.000 Student Answer: Instructor Explanation: Chapter 14.450. Points Received: Comments: 0 of 5 .000 × . 9% bonds on August 1. Question : (TCO D)When the interest payment dates of a bond are June 1 and December 1. decreased by accrued interest from June 1 to November 1. Question : (TCO D) Feller Company issues $20. What is the total cash received on the issue date? $19. 2010.97) + ($1.100.000. the amount of cash received by the issuer will be increased by accrued interest from June 1 to November 1.800. and a bond issue is sold on November 1.700.

000 Student Answer: Instructor Explanation: Chapter 14. The market rate of interest for these bonds is 10%.124 $392. Martinez Inc.901. ($3... 2010.195. Martinez should report unamortized bond premium of: $185.195. how much interest expense will be recognized in 2010? $195.036 × .500 = $184. issued $3.500 ($3.000.000.90 Points Received: Comments: 1740703746 0 MultipleChoice 1740703746 5 of 5 61 MultipleChoice True 61 15.000 × .500 $173.083 Student Answer: Instructor Explanation: Chapter 14.036.130 $184.000) – $10.901.195.082.550 $165.000 – $3. Using effective-interest amortization. Question : (TCO D) A company issues $5.000 $390. ($4. 7. Question : (TCO D) On January 1.11) – ($3. 11% bonds for $3.500.000 × .8/%.10) = $10.000. At the end of the first year. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium.000.1740703745 0 MultipleChoice 1740703745 59 MultipleChoice False 59 14. 5 of 5 Points Received: Comments: Grading Summary .000 $392.000. The proceeds from the bonds are $4.08) = $392. 20-year bonds to yield 8% on January 1.000. Interest is paid on December 31.000.

000 Journal Entries July 1. 2011.750 Points Received: Comments: 1740703748 0 Essay 1740703748 27 of 30 19 Essay False 19 2. The write-off of a limited life intangible asset can be assesssed through the process of impairement.Grade Details Page: 12 Question : 1. Therefore if the intangible asset is no longer Student Answer: .000 ÷ 10) × 4] (72.250) Carrying value at 12/31/11 $193.680 (To reocord amortization expense on patent) (92.000 Amortization 7/1/08 to 7/1/11 [($180. Explain to the management of Fred’s how to determine whether a writeoff is permitted.000 Carrying value 200.000 Credit (CR) Cash 92.000 × 1/(10 – 4+10) × 1/2] (6.000/10x4/10) 92000 .320 Carrying Value after 1 year Instructor Explanation: Solution (Chapter 12) Cost of patent $180.000) Carrying value at 7/1/11 108. Debit (DR) Patents 92.000 Amortization 7/1/11 to 12/31/11 [$200. (TCO C) Sisco Co.680 Credit (CR) Patents (Or Accumulated Patent Amortization) 3.680 = 88.000 for successful litigation in defense of the patent were paid on July 1. 2007. 2011. Expenditures of $92. Sisco amortizes the patent over a period of 10 years.000 Cost of successful defense 92. for $180. Question : (TCO C) Fred’s Company is considering the write-off of a limited life intangible asset because of its lack of profitability. Sisco estimates that the useful life of the patent will be increase by 10 years from the date of litigation becasue of successfully defending it Instructions: Prepare a computation of the carrying value of the patent at December 31.3.000 on July 1. purchased a patent from Thornton Co.000 (To record legal fees to defend the patent) Debit (DR) Amortization Expense on Patent 3. Student Answer: Patent purchased for $180.

Student Answer: 2010 Expense per toy = 1.000 x .. Instructor Explanation: (Chapter 12) Accounting standards require that if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.200 120.400 cost of toys purchased 100.000 toys were purchased. A company should do an annual or periodic evaluation to determine if there are any cahnges in the carrying cost of the assets. The same rules that are required for impairments of property. The fair value of assets is measured by their market value if an active market for them exists. then the carrying amount of the asset should be assessed.000 bags of dog food were sold. 12.000 bags of dog food were sold.life intangibles. Edwards's experience indicates that 60 percent of the coupons will be redeemed.000 x 1.6/4 = 18.profitable the following steps should be taken.20 12. The impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset.000 toys were purchased. includes one coupon in each bag of dog food it sells.000 x . 100. Therefore a recoverability test should be performed by estimating the cash flows to be obtained from the assets. During 2010. 16. 120.000 premium expense for 2011 Journal entry would debit (DR) the premium expense.000 coupons were redeemed. and 60.000 x 1. The assessment or review takes the form of a recoverability test that compares the sum of the expected future cash flows from the asset (undiscounted) to the carrying amount. During 2011. If the cash flows are less than the carrying amount. Question : (TCO D) Edwards Co. Changes mean the value may not be recoverable. plant and equipment applies to the limited . which measures the impairment cost.000 coupons were redeemed.000 premium expense for 2010 2011 16. customers receive a dog toy that the company purchases for $1. the present value of the expected future net cash flows from the asset may be used.20 = 14. The cost of the premium an .6 /4 = 15. 15 of 15 Points Received: Comments: 1740703749 0 Essay 1740703749 16 Essay False 16 3. In return for four coupons.20 each. Instructions: Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the balance sheet for 2010 and 2011.20 = 19. the asset has been impaired. The fair value test should also be applied. and 40. If no market price is available.

000. (a) On April 1. (b) On July 1.000 = 30. and the bonds mature on January 1.000 500.000 (DR) Interest Expense b) 150.30. Question : (TCO D) Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co.Instructor Explanatio n: Points Received: Comments: 1740703750 0 Essay 1740703750 30 of 30 20 Essay False 20 4.000 x 8/10 = 120.000 150. Interest is payable annually on January 1. Quirk uses straight-line amortization.000 = 470. 9% bonds for $537.868 (CR) Cash 537.869 Credit (CR) Bonds Payable 500. 2009. a) Debit (DR) Cash 537. 2011 Quirk retired $150.000 .000 (DR) Loss on Acquisition 67.000 of the bonds at 102 plus accrued interest.868 (CR) Discount on Bonds Payable 30.000 120.000 Student Answer: Instructor (Chapter 14) Explanatio n: .868 Credit (CR) Premium on Bonds Payable 37.000 Carrying Value (DR) Bonds Payable 500. 2019.868 including accrued interest. Quirk issued $500.

To settle the debt. and accumulated depreciation of $195.000 in notes payable with accrued interest of $54.000. Doran agrees to accept from Mann equipment with a fair value of $570.000 = 645.000 .000 (Chapter 14) Points Received: 15 of 20 .000 (DR) Loss on 30. Instructions: (a) Compute the gain or loss to Mann on the settlement of the debt. Student Answer: Instructor Explanation: (DR) Cash 570. (b) Compute the gain or loss to Mann on the transfer of the equipment. an original cost of $840.000.195. Question : (TCO D) Mann.000.. is in financial difficulty. $600.000 840.Points Received: Comments: 1740703751 0 Essay 1740703751 27 of 30 21 Essay False 21 5. Inc. which owes Doran Co.000 ((CR) Notes Payable 600.000.

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