Sea ANSWER 23-44 ither ¢ in under PAS 38, the aMortizats can Zation 5 coe? software en coflect the torn in whee, es @ computer ha sts economic ben are expected © asset's future ed consume, y the entity, Pde. fsuch pattern cannot be de on vpethod ia t “termined reliably, the straight line On f the JESTION 23-45 1 and au! What is the bal lan Ben software? Ce sheet classification of a computer ANSWER 23-45 Ped 1. Asa rule, computer software 4s classified as an intangible asset. 2. Computer software purchased for resale should be treated Id as inventory. : ty 3. A computer Software Purchased as an inte, ie Bral part of a computer controlled machine tool it cannot operate without the specific software should be mest operate Plant and equipment. wever, if the computer software is not an integral Part of the rel; lated hardware, it is classified as intangible asset. —eingible asset. QUESTION 23-46 Multiple choice (PAS 38) 1. An intangible asset is (choose the incorrect one) a. An identifiable nonmonetary asset without phy: sical substance, . : ' A resource controlled by an entity as a result of past event, °c. A resource from which future economic benefits are to flow to the entity. Held for sis in the production or supply of Boods or Services, for rental to others, or for administrative Purposes. ~ oaFae 2. Which is correct concerning the criterion of entities of an intangible asset? lity I An intangible asset is identifiable when it is 5¢ meaning, the asset could be sold, transterre fy, rented or exchanged. ve 1 An intangible asset is identifiable when it arise contractual or legal right. On a. Lonly b. Ionly «Both I and II @. Neither T nor I 8. Which is incorrect concerning the criterion of control jy, the entity of the intangible asset? 7 a. An entity controls an asset if the entity has the Power to obtain the future economic benefits flowing from thy underlying resource and also van restrict the access gf others to those benefits. — b. The capacity of the entity to control the economie benefits from an intangible asset would normally sten from legal rights that are enforceable in a court of law] c. Market and technical knowledge may give rise to futur economic benefits which can be controlled by the entity if the knowledge is protected by legal rights such a: copyright. _ The skill of employees arising out of the benefits of training costs can be recognized as intangible asset. 4. Future economic benefits may arise from ie Revenue from sale of products or services IL Cost savings or reduction of future production cost. a. I only b. I only 2 Both I and II d. Neither I nor II 622‘ability Mable nse from 1 by wer the sof nic em We re ity as of — oR 6. 6. 4 If payment for an intangible asset is An intangible asyot Should he Dived ig I, Itis probable thay fut to the assot will flow, to 12M0Inie benefity atts I, Tho cost of the intangibyy no ontity ttributable B88 Can be (Both I and I (ane measured rly b, Neither I nor 11 Which is incorrect concern) intangible-aeset7 98 Separate acquisition of an a If an intangible asset is ac the intangible asset can u preparing the asset for ity intended use,~ normal credit terms, its cost is eq payments over the credit. period, d. If an intangible asset is acquired in exchange for a nonmonetary asset or a combination of monetary and nonmonetary asset, the cost is measured at fair value unless the exchange transaction lacks commercial substance. 7. Which is incorrect concerning acquisition of an intangible asset as part of a purchase business combination? a, b, i i its fair value . The cost of the intangible asset is based on it t f acquisition. : ; . i yan ac St eres pie whch the fair value is equal to the 4 - i id price” ‘ Itebee ek for the intangible asset, the it would be paid by 4 . .e amount that i : fair value is equal to ee length transaction betwee: the entity in an arm8 donk knowledgeable and willing Pi business combina; . Ifan intangible asset acquired in a 7 has a finite useful life, there is a rebuttable Presumptis” that its fair value cannot be measured reliably. 8. Choose the incorrect statement. a. Internally generated goodwill shall not be Fecognizeg i ible asset. ee Internally “ee brands, mastheads, Publishing titles, customer lists and items similar in Substance should be recognized as intangible assets. ; c. The cost of internally generated intangible asse comprises all directly attributable cost necessary to Create, produce and prepare the asset for its intended use. d. To assess whether’ an internally generated intangible asset meets the criteria for recognition, an entity classifies the generation of the asset into a research Phase and a development phase. 9. The cost of an internally generated asset includes all of the following, except a. Cost of materials and services used. in generating the intangible asset. Compensation costs of personne] directly engaged in Senerating the asset, c. Fees to register a legal right, rc © Expenditure on {taining staff to operate the asset, 10. The following expenditures Should be expensed when iMmeurred, except a Start up costs - ee Payment In advance of, delive; of goods or i TY of g¢ the renderii—=y sxsw 23-46 abination ss yaad af 8. b a4 9. d — £e 0. d OBnizeg 58 i 23-47 rf tine QUESTION 29-47 Multiple choicg Pas ag) 7 *, ance 1 Subsequent expenditure on an inta . . ” hase or completion gible as, : > asset urcha may be ayn Sary to jntangible asset when 4 added to the cost ct a tendeg I, It is probable that future ey : ingible with the subsequent expenditure ngpantis ae entity IL. The subsequent expenditure can be means entity. search ae Measured reliably x Both Ian b. Neither I nor II of the ce. Ionly d. Ionly g the 2. Identifiable intangible assets include all of the following, except ed in a. Computer software b. Patent ¢. Copyright i & Goodwill vyhen - : Which statement is incorrect concerning amortization of intangible assets? ite li amortized A Intangible assets with limited or finite life are : over their useful life. ni . ring Li . «eh indefinite life are not amortized intangible assets with in rt every tw Y ut are tested for impairmey pROBLEMS problem 39-1 Multipig cl 1 Markee Patent and trate oor category of intangible al noice Gay are a, sset? |" CXAMple of which general @& Market-relateg , Customer-relateg & Artistic-relateq @ Technology-baseq 2, A patent should be amortized over a. Twenty years b. The useful life . The useful }j & The wart ors OF teettY Years, whichever ig longer Wenty Years, whichever is shorter tl 3. When a patent is amortized, © The patent account . An accumulated amortization account c. An accumulated depreciation account d. An expense account he credit is usually made to 4, When an entity successfully defended a Patent from infringement by a competitor, the cost of successful litigation should be charged to a. Patent and amortized over the legal life of the patent. b. Legal fees and amortized over five years. >> Expense of the period. i ' | Patent and amortized over the remaining useful life of the patent. 1389Se eaens pe for a product that migh, 5. The cost of purchasing rial a oarctenes patented product should be riod. f the purchased patent located to production the current Pe} : the legal life of ©. Added to factory overhead and al “3 product. of the purchaser's PP "jing useful life of the patent fa) (@) Amortized over the rem: x @ Amemizet duct whose market would have been impaired by competition from the newly patented product. Problem 39-2 (AICPA Adapted) a. Charged off in 1. Goodwill shall be recognized only when a. It is purchased from another entity. b. Itcan be established that a definite benefit has resulted from good name, capable staff or reputation. é.) It is acquired through the purchase of another entity. An entity reports above normal earnings for five years 2. What does the standard require wi eei9 quire with respect to accounting a. Goodwill should be amortized over i a five- Bb ae should be amortized over the Miseful ie c¢. Goodwill should be recorded and never adjastea’ Goodwill should be record sas for impairment. rded and periodically evaluated 3. Goodwil ‘oodwill should be tested periodically for impairment a. For the entity as a whole 2 ie the subsidiary level. , . At the industry segment level, At the i operating segment level or one level bel low. 1390An entity is perfiyr, 4é Ning 9 ight of goodwill for hte DU ont of 4 impairment ae that the fair value of yy unite" Unit, Te han d termined rrying amount, concerning the 7 Which of the followin, A the ¢ test of impairmenyy © “A4temeny, is true @ Impairment ig yoy indicate, on is necessary. e P The mall should be written down as impaired Ge determine ie liabilities should be valued to goodwill]. ere has been an impairment of d. Goodwill shoul be retested at the entity level | 5, An impairment loss recognized dand no additional analysia it for goodwill j @& Shall not be reversed in g subsequent year j b. May be reversed fully in a sub; Wane i e. ‘May be wake ubsequent year. tsed partly in a subse d. Shall be reverse ina pea A subsequent year. Problem 39-3 Multiple choice (IAA) 1 Purchased goodwill should a. Be written off as soon as earnings. b. Be written off as 500n as possible as other expense, c. Be written off by systematic charge as operating ~ ©xpense over the period benefited, @)Not be amortized. possible against retained 2. The intangible asset goodwill may be ' fa Capitalized only when purchased. . Capitalized either when purchased or created internally. ; ¢. Capitalized only when created internally. Written off directly against retained earnings.es of cost of purchase on, the exce : over the fair valu a. Other asset b. Indirect cost ,) Goodwill @. A bargain purchase Goodwill shall be tested fo If there is an indication of impairment r impairment Annually Every 5 years a & & eae. On the acquisition of a subsidiary da Which of the following intangible assets should be reported as a separate line item in the statement of financial position? @ Goodwill b. Franchise c. Patent d. Trademark Problem 39-4 Multiple choice (IAA) general category of a L A trademark is an example of which intangible asset? Y Market-related . Customer-related ¢. Artistic-related 4. Contract-based 1392| When AN entity guy: 2 elated to securin which of the following ghould not be capital, ‘lop 4 emark the co. ithe costs directly be ca : ‘Apitalized with a trademark purchase acquired Costa Zed? a, Attorney foos b, Consulting foo, =) Research and 4 é . lev ‘q. Design costs lopment fees Which of the follow; * of trademark? "”!P€ shouig Rot be capitalized zed as cost (a) Cost of suce ‘ (@® tL essful litigat: b. Registration with 7, ¢°%n of the ¢ i intelle rademark c. Design cost Stual Property Office d. Legal fee be Of 4, What is the legal life of trademark? a. 10 years b. 20 years @) 10 years and renewable aft ter every 10 © 20 years and renewable after ee 20 vente, 5. Which of the following statements is incorrect in relation to trademark? a. A trademark can be regarded as an intangible asset with an indefinite useful life considering the almost automatic renewal of the legal life. b. A trademark is an identifiable intangible asset. ¢. A trademark is not amortized but tested for impairment at least annually and whenever there is an indication of impairment. @ A trademark is amortized and tested for spelen whenever there is an indication of impairment at the end of' reporting period.PROBLEMS pice Gs oy sple cho Multiple © which gener an example © 1 category of Problem 40-1 1A canyright i intangible asset? a. Market-related b. Customer-relate (© Artistic-relate d. Contract-based ght are an example of which roadcast Ti f intangible a 2. Franchise and bi t? general category © a a. Market-related b. Customer-related c. Artistic-related @) Contract-based 3. Customer list and order backlog are an example of which general category of intangible asset? a. Market-related () Customer-related c. Artistic-related d. Contract-based 4. Copyright should be amortized over Vie. 9 SO Year apter dear a. The legal life b. The life of the creator plus fifty years a sents years e useful life or legal life, whichever is shorter 5. Which of th ing } amortized? ¢ following intangible assets should not be a. Copyright ustomer Jist Perpetual franchise All of the i intangible assets should be @ amortized. 1428category of of which vhich - Heaumaateen g. Which of the fy How, by the franchiseg ¢i9® sho See for f Tranche pened as incurred ith finite useful life? a. Amount paiq to the b. Payment to an en? franchisg, ontity’s franchigg. ther thar rth’ franchise c. Legal fees . ‘e e franchisor, for that, franchise, 4 € the franchisees Periodic Jo Payme; © franchisee’s revente ‘awyers to obtain the to the franch: ’ isor based on the 7. An airline entity . = ; Purch; fale, international a ased airline ‘i the entity has the abn ith a legal life of five yea tat a ten years for an inden and Tight to extend the rights eens of time should the entity amortize gga Maat etal a. 5years b. 15 years c. 40 years D The rights should not be amortized. a. Capitalized as leasehold improvement and depreciated over twenty years. 4D Capitalized as leasehold improvement and depreciated over fifteen years. c. Capitalized as leasehold improvement and expensed in the year in which the lease expires. d. Expensed as incurred. 9. Start-up costs including legal and state fees to organize a new entity should be a. Capitalized and never amortized. talize i ble period. italized and amortized over a reasonal ; ea and tested for impairment annually. Expensed as incurred. 142912) soe (ERIC jple choice ¢ Problem 40-2 Multiple “pe sector nll Brats nt whereby 2 PY ide services that give ator to prow™jomic and soca) major nd velecommunication 1, Itis an arrangeme! ressW' a private concession Per the public access infrastructure, such as ¢XP! network. @ Service concession b. Loan ¢. Government grant d. Government assistance hall recognize the 2. The private concession operator § infrastructure asset as a. Intangible asset . Financial asset ; Either intangible asset or financial asset . Neither intangible asset nor financial asset 3. The infrastructure asset shall be recognized by the concession operator as an intangible asset when I. The operator has received a right, not_alicense, to charge users for the public service. 7 z receivable is not agreed y: i pon in a is © dependent on the use of the asset, eesti a. Tonly b. only © Both Tandy d. Neither J nor IThe infrastructure ci I. oncession operator j. a S8et sh; all b A © recogniz The operat “financial assetwhen rator ha, ae “ to receive cash oye” wnconditi, ash ove ‘onditional x the life ot ‘al contractual right 3 a of the arrangement. II. The grantor hag ¢, oo; un Lr operator the specified ot guaranteed to pay the erminable amount. lonly TI only Neither I nor IL Z © Both I and It If the infrastructure asset is recognized by the concession operator as a financial asset, it is accounted for as a. Loan receivable pb. Financial asset at fair value th comprehensive income Financial asset at fair value through profit or loss rough other i All of thesePROBLEMS Problem 41-1 muy; i L. Which of 4 and develop ole L Expenditure g * ari fometines ca ec ha U. Expenditure du, ple choice arrsy Wing st; ate) i *S true? ™eNts in relation to research of a project may as i ao opengible asset. e duri MAY sometimes {re the devels® ag imetnes i apSefMN Phas of pj Lor gible asset. ¢. Both Tang a. Neither nes 1 2. Which of the « followi development” is trues" Statements in relation to I. The i products being developed should have already been, 0. put into commer; duction or use. IL. Develo i on ieee he era involves the application of research a. I only TI only c. Both I and II d. Neither I nor II 3. A dot-com entity has recently completed a highly publicized research and development project. Which of the following statements in relation to the reseatch and development. project is true? a. Costs incurred during the research phase can be capitalized. Costa incurred during the development phase can be capitalized if criteria such as technical feasibility of the ‘ect being established are met. c Troming casts of technicians used in research can be capitalized. , jigs and tools would qualify as research d. Designing © activities. & x 1449surrent method of ent cost? ne 4, Which principle be accounting for res and ration? ation one ‘tion ‘as an expen urred for the purpose ontity's product or " ¢., Income tax minit @ Immediate recog” costs ine! 5. Web site development eo a of promoting and adver service should be ae set with a definite life th indefinite life, ) Expensed as incur’ . ntangible as v Recognized as an in sset Wit i c. Recognized as an intangible & set Comprehensive Included as compon income. Problem 41-2 Multiple choice (AICPA Adapted) ed in creating 1. The proper accounting for costs incurr' d. computer software is a. To capitalize all costs until the software is sold. To charge research and development expense when (@ incurred until technological feasibility has been established for the product. To charge research and development expense only if 0. the computer software has alternative future use. d. To capitalize all costs as incurred until a detailed program design or working model is created. rue regarding the 2. Which of the following statements is t proper accounting treatment for internal-use software costs? I. Preliminary costs should be capitalized as incurred. IL Application and Heer dev capitalized ae incurs opment costs should be a. I only JI only ~ Both I and II d. Neither I nor If,3. Which of the internal-use follo win, Softwares Meme nts ig j r is a. The ap Meorrect re PPlic garding at use softwo Software : h © sh ’ basis unless » hould be», lopment coma more approp other s Amortized on the f internal (07 Internaluse te ematic and wc rma line tional basi is is m Softw; arkete. are is considered to be ob rod asa Product or prog @Paate product software that or ce. ce: ae costs of testine fe past of 0 ‘ould be capi € and installi d. The costs era as Tne Pte hardware Fie r show Yainin, ld expensed as Han application maintenance 4. A comput er softwar: for the hardware ae aoe is ee qpeciting controlled machine tool a integral Dart fle eae specific software shall be sceeal oF operate witha ystem, puter ut the a. Intangible asset @ Property, plant and equipment ¢. Inventory d. Expense 5. At the beginning of the current year, an entity had capitalized cost for a new computer software product with an economic life of four years. Sales for the current year were ten percent of expected total sales of the software The pattern of future sales cannot be Re : vare he al e 2 ee year-end, the OE wr red oat. The unamortized i f the capitalize s to eighty pera : end statement of financial cost reported in the year position should be -gable value : Net realiat net realizable value é Ninety P ive pereent of capitalized COs c. Seventy cent of capitalized cost d. Ninety pe a ant, :PA Adapted) Problem 41-3 Multiple choice (AICPA a velopment costs 1. Which of the following research and develonmclil ots should be capitalized and amortized ov periods? tory building (@ Research and development general laboratory b. Inventory used for a specific research Proje ad ¢. Administrative salaries allocate development hicwioaia 4. Research findings purchased from Set oceoe a particular research project current it ilding to be used as a 2. If an entity constructs a laboratory buil research Ae development facility, the cost of the laboratory building is matched against earnings as a. Research and development expense in the period of construction. Depreciation deducted as part of research and development expense. ©. Depreciation or immedia policy. d. Anexpense at such time as productive research has been obtained from the facility. ite writeoff depending on entity 3. Which of the following research and development costs should be capitalized and amortized over current and future periods? a. Labor and material ¢ 6) prototype or model, Cost of testing equipment that w: another separa scheduled to be; c. Administrative salaries allocated to research and development. d. Research findings purchased a particular research Project osts incurred in building a rill also be used in ‘te research and dévelopment Project gin next year. from another entity to aid currently in Process,1. A research And de. would be @ ned be expose a8 nett AtMtY for whieh h ad 2 ee for which the coat (& Design ae constr, Prototype 2 "ction ang Se on wre 4 testing of pr proto ay ® of preproduction Y conty; Periods at? dting commercial Bn changes to existing prod” . ducts requii N existin, Wirement oy, Susie capability to a particular ao a & 2 = 5. Which is no activity? @) Routine o ane On-going eff quality of existing a refine, enrich or improve Laborato: TY re i : Knowledge Weareh Giteed gi Giacovery of now ©. Conceptual Fi . ornate formulation and design of possible product d. Design, construction and operation of a pilot plant Problem 41-4 Multiple choice (IAA) 1; How should research and development cost be accounted ‘or? a. Must be capitalized when incurred and then amortized over useful life. b. Must be expensed in the period incurred, c. May be either capitalized or expensed when incurred depending upon the materiality. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future use or unless contractually reimbursable. 2. Which of the following would be considered research and development? i refi xisting product . Routine effort to refine an exis| : & Periodic alteration to existing production line C. Marketing research to promote a new product Construction of prototype 1453jd not be capital ju costs 6h" 3. Which of the followin ed On Curreny be used o nt to jquipme jon cost of equ ‘ect. Snare 2 Aegan ce rt gyance the P Bogino ing cost incur Engineer af 3: b, Roce production stae patente ie Jost incurred to file ee @C0 Cost of testing prototype 7 . has been demonstrate be excluded frory Which of the following costs should ein hand development exp t to easibility i oduct. ; Modification of the design of a Ps reoment eduipiient b. Acquisition of research and en ” for use on a current project only wr product Cost of marketing research for et ieee Y Engineering activity required to a Hee of a product to the manufacturing 8\ . 5. Which of the following would not be considered research and development activity? (® Adaptation of an existing capability to a particular ‘requirement or customer need. b. Application of research finding or other knowledge to a plan for a new product. A ¢. Laboratory research aimed at discovery of new knowledge. d. Conceptual formulation and design of possible product alternative, 6. Research activities inelude all of the following, except L Si icati, i a pe pplleation of research finding or other b. Search fo ¥ product or pr ‘ ¢. Formulation and d Process alternative, @ Process alternatiy, design of the Possible product or Design, const; Tuction F Prototype and modo}, and testing of Preproduction Vana7. Development Activities incty, i except - all of the following. a. Design of tool technology,’ 188. m nolds and , parce nd dies involy ing new st = tr ction and operation of a pil on of a pilot plant that is not of a sca] seale comm c mercial productini® ©OPOmically feasible for knowledge. 8. Which of t! i had Meee following is not a criterion which must be levelopment cost can be capitalized? : a. The entity h i a : complete the pica financial resources to . e entity intends to complete t cf use oF sell the intangible pers eo ue aete oe © The entity can reliably identify the research cost incurred to bring the project to economic feasibility d. The project has achieved technical feasibility 9. Which of the following costs should be capitalized” a. Acquisition cost of equipment to be used on current research project only Engineering cost jncurred to advance the product. to the full production stage : Cost of research to determine whether a market for the product exists d. Salaries of research staff 10, Which of the following statements i accounting for sdevelopment cost sed nt cost must be expense! | b eee eeat cost is always deferred and expensed ' i evenue . against ign e + be capitalized as an intangible ent cost may cap) © Develo ey ive situations. cof other d. ster spment cost is recorded as component . Develo} ft, 008 comprehensive income. c. s true about 1455