Question 1: Trademarks or trade names
must be renewed every 40 years
can be considered intangibles with indefinite lives
are developed internally and thus should not have any related costs capitalized and amortized
are synonymous with internally developed goodwill
Question 2: The factors involved in computing periodic depreciation charges for an asset do not include the
method of cost allocation
current value of the asset
service life
residual value of the asset
Question 3: Which of the following statements concerning internally developed goodwill is true?
it is a separately identifiable asset
it is capitalized at its cost
the costs associated with its development are expensed as incurred
measuring its value is relatively easy and reliable
Question 4: Software production costs related to computer software that is to be sold, leased, or otherwise marketed should be accounted for in which of the following ways:
all software production costs should be recorded as R&D expense
all software production costs should be capitalized
all software production costs should be recorded in R&D expense until technological feasibility is established
all software production costs should be recorded in R&D expense until the product is available for general release to customers
Question 5: Which one of the following statements is true?
The activity method of computing depreciation could result in zero depreciation expense in some periods of time.
If the activity method is in use, residual value should not be subtracted from cost to determine the depreciation base.
The activity method produces a constant unit cost of depreciation.
The activity method should be used when the service life of the asset is affected mostly by the passage of time.
Question 6: On January 1, 2004, Central Products, Inc., purchased 500 condensers for line use at a cost of $2,000 each. In 2005, two condensers had to be replaced at a cost of $2,500 each. Which one of the following statements is not true?
in 2005, there will be depreciation expense of $5,000 if the replacement depreciation method is in use
in 2004, there will not be any depreciation expense recorded if the retirement depreciation method is in use
in 2005, there will be $4,000 of depreciation expense if the replacement depreciation method is in use
in 2005, the retirement depreciation method will result in less depreciation expense than the replacement depreciation method
Question 7: During 2006, Rockon Company, Inc. incurred $240,000 in legal fees in defending a patent against an infringement with a carrying value of $2,500,000. Rockon¿s lawyers were not successful with the defense of the patent. The legal fees should be
expensed in 2006 and classified as ordinary expense
classified as an extraordinary item on the income statement for 2006
capitalized and amortized over the remaining legal life of the patent
capitalized and amortized over the remaining economic life or legal life of the patent, whichever is shorter
Question 8: FASB Statement No. 2 requires that research and development costs be
capitalized
expensed as incurred
accumulated until the existence of future benefits is determined
expensed in part and capitalized in part
Question 9: Which depreciation method calculates annual depreciation expense based on the book value of an asset?
double-declining balance
sum-of-the-years'-digits
inventory systems
group depreciation
Question 10: Which amortization method should be used for intangibles that are amortized?
a method based on the expected pattern of benefits to be produced by the asset
a method based on an annual review for impairment
the straight-line method; all others are inappropriate
any method is appropriate
Question 11: Which one of the following statements is not a disclosure requirement for depreciation?
the balance of major classes of depreciable assets
a general description of the method(s) used for depreciation
the accumulated depreciation for each major class of depreciable asset
the useful lives for each major class of depreciable asset
Question 12: Which statement regarding goodwill is true?
goodwill is an unidentifiable intangible asset
internally developed goodwill should be capitalized while purchased goodwill should be expensed
goodwill can be defined as the value attached to the ability of a company to earn a higher than normal rate of return on the book value of its identifiable assets
in some situations, FASB Statement No. 141 requires that negative goodwill be recorded
Question 13: What effect does depreciation have on the calculation of the rate of return on total assets?
affects both the numerator and denominator
no effect
increases it
decreases it
Question 14: Concerning computer software to be sold, leased, or otherwise marketed, which of the following costs are inventoriable and thus included in cost of goods sold?
maintenance and customer support costs
design, coding, and testing costs incurred before technological feasibility is established
costs of software developed for internal use
costs of disks, software duplication, and training materials
Question 15: The Pecan Street Ice Cream Company discovers that depreciation expense was overstated last year. How should this discovery be reported in the current year?
as a reduction in the current year's depreciation expense
as an increase to the retained earnings beginning balance
as a miscellaneous item in the Other Revenue/Expense section of the income statement
as a footnote only to the current year's financial statements
Question 16: Which of the following expenditures cannot be included in R&D costs?
indirect costs
intangibles purchased from others
personnel costs
contract services performed for others
Question 17: Which of the following is not a required disclosure regarding goodwill for each period a company presents a balance sheet?
the amount of goodwill acquired
the amount of goodwill sold
the amount of any impairment loss recognized
the amount of any goodwill included in the disposal of a reporting unit
Question 18: Related to in-process R&D the acquiring company may:
capitalize it.
treat it as an intangible asset.
increase the amount of goodwill.
establish a patent in the name of the purchased company.
Question 19: Which one of the following disclosures is required by generally accepted accounting principles?
depreciation expense for each major class of asset
balances of major classes of depreciable assets, by nature or function
accumulated depreciation on each depreciable asset
an explanation of why the depreciation method used was selected by management
Question 20: Which of the following methods is used to amortize intangible assets over their useful lives?
a declining balance method
straight line
annual review for impairment
intangible assets are not amortized