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Intangibles Toa PDF Free
Intangibles Toa PDF Free
3. Which of the following statements is true in relation to control by the entity of the
intangible asset?
a. The capacity of the entity to control the economic benefits from an intangible
asset would normally stem from legal rights that are enforceable in a court of law.
b. The skill of employees arising out of the benefits of training costs cannot be
recognized as intangible asset.
c. Market share and customer loyalty cannot normally be recognized as intangible
asset because an entity cannot control the action of customers.
d. d. All of these statements are true.
8. The cost of an internally generated intangible asset includes all of the following, except
a. Expenditure on materials used in generating the intangible asset.
b. Compensation costs of personnel directly engaged in generating the asset.
c. Fees to register a legal right.
d. Expenditure to on training staff to operate asset.
10. Which of the following statements is true concerning amortization and impairment of
intangible assets?
a. Intangible assets with finite useful life are amortized over the useful life.
b. Intangible assets with finite useful lifer are tested for impairment at the end of
reporting period when there is an indication of impairment.
c. Intangible assets with indefinite useful life are not amortized but are tested for
impairment at least annually.
d. d. All of these statements are true.
1. C 6. D
2. C 7. D
3. D 8. D
4. D 9. D
5. D 10. D
Problem 40-2 Multiple Choice (PAS 38)
1. It is the systematic allocation of the amortizable amount of an intangible asset over the
useful life.
a. Amortization
b. Allocation
c. Realization
d. Expiration
2. The amortization method used shall reflect the pattern in which the asset’s economic
benefits are consumed by the entity. If such pattern cannot be determined reliably, what is
the amortization method used?
a. Straight line
b. Production method
c. Diminishing balance method
d. Ratio of current year’s sales to the expected sales
3. The factors that need to be considered in determining the useful life of an intangible asset
include all of the following, except
a. Technical obsolescence
b. Expected action of competitors
c. Expected usage of the asset by the entity
d. Residual value
5. The residual value of an intangible asset with a finite useful life shall be assumed zero,
except
a. When there is a commitment by a third party to purchase the asset at the end of
the useful life.
b. When there is an active market for the asset and it is probable that such market
will exist at the end of the useful life.
c. When there is a commitment by a third party to purchase the asset at the end of
the useful life or there is an active market for the asset and it is probable that such
market will exist at the end of useful life.
d. There are no exceptions.
7. The cost of a separately acquired intangible asset comprises the purchase price, including
import duties and nonrefundable purchases taxes, and
a. Cost of introducing a new product or service.
b. Cost of conducting a business in a new location.
c. Administration and other general overhead cost
d. Directly attributable cost of preparing the asset for the intended use.
8. Directly attributable costs of preparing the intangible asset for the intended use include
all, except
a. Cost of employee benefits arising directly from bringing the asset to working
condition.
b. Professional fee arising directly from bringing the asset to working condition.
c. Cost of testing whether the asset is functioning properly.
d. Initial operating loss.
10. Which of the following represents the maximum amortization period mandated for an
intangible asset with finite useful life?
a. 10 years
b. 20 years
c. 40 years
d. No arbitrary cap on the useful life has been established.
1. A 6. C
2. A 7. D
3. D 8. D
4. A 9. C
5. C 10. D
6. Amortization of an intangible asset with a finite useful life shall commence when
a. It is first recognized as an asset.
b. It is probable that it will generate economic benefit.
c. It is available for intended use.
d. The cost can be identified with reasonable certainty.
8. The recognition criteria for an intangible asset include which of the following conditions?
a. The intangible asset must be measured at cost.
b. The cost can be measured reliably.
c. It is probable that future economic benefit will arise from use.
d. It is probable that future economic benefit will arise from use and the cost can be
measured reliably.
10. Intangible assets with indefinite useful life are tested for impairment
a. Quarterly at the quarterly reporting date
b. Annually at the annual reporting date
c. Biannually at the reporting date
d. There is no guidelines for impairment
1. D 6. C
2. D 7. D
3. B 8. D
4. D 9. A
5. C 10. B
2. An entity that acquires an intangible asset may use the revaluation model for subsequent
measurement only if
a. The useful life of the intangible asset can be reliably determined
b. An active market exists for the intangible asset.
c. The cost of the intangible asset can be measured reliably.
d. The intangible asset is a monetary asset.
3. Which of the following is a criterion that must be met in order for an intangible asset to
be recognized other than goodwill?
a. The fair value can be measured reliably.
b. The asset is the part of the activities aimed at gaining new scientific or technical
knowledge.
c. The asset is expected to be used in the production or supply of goods or services.
d. The asset is identifiable and lacks physical substance.
4. Operating losses incurred during the start-up years of a new entity should be
a. Accounted for and reported like any other operating losses.
b. Written off directly against retained earnings.
c. Capitalized as deferred charge and amortized over five years.
d. Capitalized as an intangible asset and amortized over twenty years.
1. C
2. B
3. D
4. A
4. Which of the following methods of amortization is normally used for an intangible asset?
a. Sum of the years’ digit
b. Straight line
c. Units of production
d. Double declining balance
7. Entities should evaluate indefinite life intangible assets at least annually for
a. Recoverability
b. Amortization
c. Impairment
d. Estimated useful life
9. The factors in determining the useful life of an intangible asset include all of the
following, except
a. The expected use of the asset.
b. Any legal or contractual provision that may limit the useful life.
c. Any provision for renewal or extension of legal life of the asset.
d. The amortization method used.
1. B 6. A
2. C 7. C
3. C 8. D
4. B 9. D
5. B 10.B
5. The cost of purchasing right for a product that might otherwise have seriously competed
with the purchaser’s patented product should be
a. Expensed in the current period.
b. Amortized over the legal life of the purchased patent.
c. Added to factory overhead.
d. Amortized over the remaining useful life of the patent for the product whose
market would have been impaired be competition from the newly patented
product.
1. D
2. D
3. A
4. C
5. D
4. In performing an annual test for the impairment of goodwill for a cash generating unit,
the fair value of the unit exceeds the carrying amount. Which statement is true concerning
the test of impairment?
a. Impairment is not indicated and no analysis is necessary.
b. Goodwill should be written down as impaired.
c. The assets should be valued to determine if there has been an impairment of
goodwill.
d. Goodwill should be retested at the entity level.
1. C
2. D
3. D
4. A
5. A
3. In a business combination, the excess of acquisition cost over the fair value of the
identifiable net assets acquired is
a. Other asset
b. Indirect cost
c. Goodwill
d. A bargain purchase
5. Which intangible asset should be reported as a separate line item in the statement of
financial position?
a. Goodwill
b. Franchise
c. Patent
d. Trademark
1. D
2. A
3. C
4. B
5. A
2. Which of the following costs associated with a trademark should not be capitalized?
a. Attorney fee
b. Consulting fee
c. Research and development fee
d. Design cost
1. A
2. C
3. A
4. C
5. D
2. Franchise and broadcast rights are an example of which general category of intangible
asset?
a. Market-related
b. Customer-related
c. Artistic-related
d. Contract-based
3. Customer list and order backlog are an example of which general category of intangible
asset?
a. Market-related
b. Customer-related
c. Artistic-related
d. Contract-based
6. Which of the following should be expensed as incurred by the franchisee for a franchise
with finite useful life?
a. Amount paid to the franchisor for the franchise
b. Payment to an entity, other than the franchisor, for that entity’s franchisee
c. Legal fees paid to the franchisee’s lawyers to obtain the franchise
d. Periodic payments to the franchisor based on the franchisee’s revenue
7. An airline entity purchased airline gate rights at an international airport with a legal life
of five years. However, the entity has the ability and right to extend the rights every ten
years for an indefinite period of time. Over what period of time should the entity amortize
the gate right?
a. 5 years
b. 15 years
c. 40 years
d. The rights should not be amortized
8. A lessee incurred cost to construct walkway and landscaping to improve leased property.
The useful life of the walkway and landscaping cost is fifteen years. The remaining term
of the non-renewable lease is twenty years. The walkway and landscaping cost should be
a. Capitalized as leasehold improvement and depreciated over twenty years.
b. 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 cost including legal and state fees to organize a new entity should be
a. Capitalized and never amortized.
b. Capitalized and amortized over a reasonable period.
c. Capitalized and tested for impairment annually.
d. Expensed as incurred.
5. The infrastructure asset recognized by the private concession operator as a financial asset
should be accounted for as
a. Financial asset at amortized cost
b. Financial asset at fair value through profit or loss
c. Either financial asset at amortized cost or financial asset at fair value through
profit or loss
d. Neither financial asset at amortized cost nor financial asset at fair value through
profit or loss
1. A
2. C
3. C
4. C
5. C
2. A dot-com entity has recently completed a highly publicized research and development
project. Which of the following statements is the most accurate?
a. Costs incurred during the research phase can be capitalized.
b. Costs incurred during the development phase can be capitalized if criteria such as
technical feasibility of the project being established are met.
c. Training cost of technicians used in research can be capitalized.
d. Designing of jigs and tools would qualify as research activities.
3. Which principle best describes the current method of accounting for research and
development cost?
a. Associating cause and effect
b. Systematic and rational allocation
c. Income tax minimization
d. Immediate recognition as an expense
4. Web site development costs incurred for the purpose of promoting and advertising a
project should be
a. Expensed as incurred
b. Recognized as an intangible asset with a finite life
c. Recognized as an intangible asset with indefinite life
d. Included as component of other comprehensive income
2. Which of the following statements is true regarding the proper accounting treatment for
internal-use software costs?
I. Preliminary costs should be capitalized as incurred.
II. Application and development costs should be capitalized as incurred
a. I only
b. II only
c. Both I and II
d. Neither I nor II
5. At the beginning of 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
measured reliably. At year-end, the software had a net realizable value equal to eighty
percent of the capitalized cost. Thee unamortized cost reported in the year end statement
of financial position should be
a. Net realizable value
b. Ninety percent of net realizable value
c. Seventy five percent of capitalized cost
d. Ninety percent of capitalized cost
1. B
2. B
3. B
4. B
5. C
4. A research and development activity for the cost would be expensed as incurred is
a. Design, construction and testing of preproduction prototype or model
b. Quality control during commercial production
c. Periodic design changes to existing product
d. Adaptation of an existing capability to a particular requirement or customer need
6. At the beginning of current year, an entity purchased equipment for use in developing a
new product. The entity used the straight line depreciation method. The equipment could
provide benefits over a 10-year period. However the new product development is
expected to take five years, and the equipment can be used only for this project. The
expense for the current year in relation to the equipment equals
a. The total cost of the equipment
b. One-fifth of the cost of the equipment
c. One-tenth of the cost of the equipment
d. Zero
1. A
2. B
3. D
4. A
5. A
6. A
2. Which of the following statements is true about accounting for development cost?
a. Development cost must be expensed
b. Development cost is always deferred and expensed against future revenue
c. Development may be capitalized as an intangible asset in very restrictive
situations
d. Development cost is recorded as component of other comprehensive income
5. Which of the following cost should be excluded from research and development expense?
a. Modification of the design off a product
b. Acquisition of research and development equipment for the use on a current
project only
c. Cost of marketing research for a new product
d. Engineering activity required to advance the design of a product to the
manufacturing stage.
6. Which of the following would not be considered research and development activity?
a. 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
c. Laboratory research aimed at discovery of new knowledge
d. Conceptual formulation and design of possible product alternative
7. Which of the following is not a criterion which must be met before development cost
may be capitalized?
a. The entity has sufficient financial resources to complete the project
b. The entity intends to complete the project and either use or sell the intangible
asset
c. The entity can reliably identify the research cost incurred to bring the project to
economic feasibility
d. The project has achieved technical feasibility
1. D 6. A
2. C 7. C
3. D 8. B
4. D 9. D
5. C 10.D