84. Lynne Corporation acquired a patent on May 1, 2010 .
Lynne paid cash of $30,000 to the seller. Legal fees of $1,000 were paid
related to the acquisition. What amount should be debited to the patent
account?
a. $1,000
b. $29,000
c. $30,000
d. $31,000
85. Contreras Corporation acquired a patent on May 1, 2010 . Contreras
paid cash of $25,000 to the seller. Legal fees of $900 were paid related to the
acquisition. What amount should be debited to the patent account?
a. $900
b. $24,100
c. $25,000
d. $25,900
86. Mini Corp. acquires a patent from Maxi Co.
in exchange for 2,500 shares of Mini Corp.’s $5 par value ordinary shares and
$75,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.’s shares
were selling at $7.50 per share. When Mini Corp. acquired the patent, its shares
were selling for $9 a share. Mini Corp. should record the patent at what
amount?
a. $87,500
b. $93,750
c. $97,500
d. $75,000
87. Alonzo Co. acquires 3 patents from Shaq
Corp. for a total of $360,000. The patents were carried on Shaq’s books as
follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000. When
Alonzo acquired the patents their fair values were: Patent AA: $20,000; Patent
BB: $240,000; and Patent CC: $60,000. At what amount should Alonzo record
Patent BB?
a. $120,000
b. $240,000
c. $2,000
d. $270,000
88. Jeff Corporation purchased a limited-life
intangible asset for $120,000 on May 1, 2009 . It has a useful life of 10 years.
What total amount of amortization expense should have been recorded on the
intangible asset by December
31, 2011 ?
a. $ -0-
b. $24,000
c. $32,000
d. $36,000
89. Rich Corporation purchased a limited-life
intangible asset for $210,000 on May 1, 2009 . It has a useful life of 10 years.
What total amount of amortization expense should have been recorded on the
intangible asset by December
31, 2011 ?
a. $ -0-.
b. $42,000
c. $56,000
d. $63,000
90. Thompson Company incurred research and
development costs of $100,000 and legal fees of $40,000 to acquire a patent.
The patent has a legal life of 20 years and a useful life of 10 years. What
amount should Thompson record as Patent Amortization Expense in the first year?
a. $0.
b. $ 4,000.
c. $ 7,000.
d. $14,000.
91. ELO
Corporation purchased a patent for $90,000 on September 1, 2009 . It had a useful
life of 10 years. On January
1, 2011 , ELO spent $22,000 to successfully defend the patent in a
lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What
amount should be reported for patent amortization expense for 2011?
a. $20,600.
b. $20,000.
c. $18,800.
d. $15,600.
92. Danks
Corporation purchased a patent for $450,000 on September 1, 2009 . It had a useful
life of 10 years. On January
1, 2011 , Danks spent $110,000 to successfully defend the patent in
a lawsuit. Danks feels that as of that date, the remaining useful life is 5
years. What amount should be reported for patent amortization expense for 2011?
a. $103,000.
b. $100,000.
c. $94,000.
d. $78,000.
93. The
general ledger of Vance Corporation as of December 31, 2011 , includes the
following accounts:
Copyrights $ 30,000
Deposits with advertising agency (will be used to
promote goodwill) 27,000
Bond sinking fund 70,000
Excess of cost over fair value of identifiable
net assets of
Acquired
subsidiary 390,000
Trademarks 90,000
In the preparation of Vance's
statement of financial position as of December 31, 2011 , what should be reported as
total intangible assets?
a. $480,000.
b. $507,000.
c. $510,000.
d. $537,000.
94. In
January, 2006, Findley Corporation purchased a patent for a new consumer
product for $720,000. 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 2011 the product was
permanently removed from the market under governmental order because of a
potential health hazard present in the product.
What amount should Findley charge to expense during 2011, assuming
amortization is recorded at the end of each year?
a. $480,000.
b. $360,000.
c. $72,000.
d. $48,000.
95. Day
Company purchased a patent on January 1, 2010 for $360,000. The patent had a remaining
useful life of 10 years at that date. In January of 2011, Day successfully
defends the patent at a cost of $162,000, extending the patent’s life to 12/31/22 . What
amount of amortization expense would Kerr record in 2011?
a. $36,000
b. $40,500
c. $43,500
d. $54,000
96. On
January 2, 2011 ,
Klein Co. bought a trademark from Royce, Inc. for $1,000,000. An independent
research company estimated that the remaining useful life of the trademark was 10
years. Its unamortized cost on Royce’s books was $800,000. In Klein’s 2011
income statement, what amount should be reported as amortization expense?
a. $100,000.
b. $ 80,000.
c. $ 50,000.
d. $ 40,000.
97. A company acquires a patent for a drug with
a remaining legal and useful life of six years on January 1, 2009 for $1,800,000. The
company uses straight-line amortization for patents. On January 2, 2011 , a new patent
is received for a timed-release version of the same drug. The new patent has a
legal and useful life of twenty years. The least amount of amortization that
could be recorded in 2011 is
a. $300,000.
b. $ 60,000.
c. $ 81,818.
d. $ 69,000.
98. Blue Sky Company’s 12/31/10 statement of
financial position reports assets of $5,000,000 and liabilities of $2,000,000.
All of Blue Sky’s assets’ book values approximate their fair value, except for
land, which has a fair value that is $300,000 greater than its book value. On 12/31/10 , Horace
Wimp Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill
should Horace Wimp record as a result of this purchase?
a. $ -0-
b. $100,000
c. $1,800,000
d. $2,100,000
99. Dotel Company’s 12/31/10 statement of financial
position reports assets of $6,000,000 and liabilities of $2,500,000. All of Dotel’s
assets’ book values approximate their fair value, except for land, which has a
fair value that is $400,000 greater than its book value. On 12/31/10 , Egbert
Corporation paid $6,100,000 to acquire Dotel. What amount of goodwill should Egbert
record as a result of this purchase?
a. $ -0-
b. $ 100,000
c. $2,200,000
d. $2,600,000
100. Floyd Company purchases Haeger Company for
$800,000 cash on January
1, 2011 . The book value of Haeger
Company’s net assets, as reflected on its December 31, 2010 statement of
financial position is $620,000. 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, and the fair value of
identifiable intangible assets exceeded book value by $45,000. How much goodwill should be recognized by Floyd
Company when recording the purchase of Haeger Company?
a. $ -0-
b. $180,000
c. $120,000
d. $75,000
101. During 2011, Bond Company purchased the net assets of May
Corporation for $1,000,000. On the date of the transaction, May had $300,000 of
liabilities. The fair value of May's assets when acquired were as follows:
Current assets $ 540,000
Noncurrent assets 1,260,000
$1,800,000
How
should the $500,000 difference between the fair value of the net assets
acquired ($1,500,000) and the cost ($1,000,000) be accounted for by Bond?
a. The $500,000 difference
should be credited to retained earnings.
b. The $500,000
difference should be recognized as a gain.
c. The current assets
should be recorded at $540,000 and the noncurrent assets should be recorded at
$760,000.
d. A deferred credit
of $500,000 should be set up and then amortized to income over a period not to
exceed forty years.
102. Grande Company purchases Enfant Company for €13,985,000 cash on January 1, 2011 . The book value of Enfant Company’s net assets
reported on its December
31, 2010 statement of financial position was €12,620,000. Grande's December 31, 2010
analysis indicated that the fair value of Enfant's tangible assets exceeded the
book value by €560,000, and the
fair value of identifiable intangible assets exceeded book value by €245,000. How much goodwill should be
recognized by Grande Company when recording the purchase of Enfant?
a. $ -0-
b. €560,000
c. €1,365,000
d. €2,170,000
Use the following information for questions 103 and 104.
On January
1, 2011 , Bingham Inc. purchased a patent with a cost €1,160,000, a useful life of 5 years. The company
uses straight-line depreciation. At December 31, 2012 , the company determines that
impairment indicators are present. The fair value less cost to sell the patent
is estimated to be €540,000. The patent's
value-in-use is estimated to be €565,000. The asset's
remaining useful life is estimated to be 2 years.
103. Bingham's 2012 income statement will report
Loss on Impairment of
a. €0.
b. €131,000.
c. €156,000.
d. €595,000.
104. The company's 2013 income statement will
report amortization expense for the patent of
a. $188,333.
b. $232,000.
c. $282,500.
d. $595,000
105. On August 1, 2011 , Li Inc. purchased a license
with a cost of HK$5,265,000 and a useful life of 10 years. At December 31, 2013 ,
when the carrying value of the asset was HK$3,992,625, the company determined
that impairment indicators were present. The fair less cost to sell the license
was estimated to be HK$3,693,200. The asset's value -in-use is estimated to be
HK$3,802,5000. Li's 2013 income statement will report Loss on Impairment of
a. HK$109,300.
b. HK$190,125.
c. HK$299,425.
d. HK$1,272,500.
Use the following information for questions 106 and 107.
On January 2,
2011 , Lutz Inc. purchased a patent with a cost CHF940,000 a useful life of 4 years. At December 31, 2011 ,
and December 31,
2012 , the company determines that impairment indicators are
present. The following information is available for impairment testing at each
year end:
Fair
value less costs to sell CHF715,000 CHF420,000
Value-in-use CHF750,000 CHF445,000
No changes were made in the asset's estimated
useful life.
106. The company's 2012 income statement will
report
a. Amortization
Expense of CHF235,000
b. Amortization
Expense of CHF235,000 and Loss on Impairment of CHF10,000.
c. Amortization
Expense of CHF235,000 and a Recovery of Impairment of CHF45,000.
d. Loss on impairment
of 190,000.
107. The company's 2012 income statement will
report
a. Amortization
Expense of CHF235,000.
b. Amortization
Expense of CHF250,000 and Loss on Impairment of CHF55,000.
c. Amortization
Expense of CHF235,000 and a Loss of Impairment of CHF25,000.
d. Loss on impairment
of CHF70,000.
108. On June 2, 2011, Lindt Inc. Purchased a
trademark with a cost €9,440,000. The trademark is classified as an
indefinite-life intangible asset. At December 31, 2011 and December 31, 2012,
the following information is available for impairment testing:
Fair
value less costs to sell €9,115,000
€9,050,000
Value-in-use €9,350,000
€9,550,000
The
2012 income statement will report
a. no Impairment Loss
or Recovery of Impairment.
b. Impairment Loss of €90,000.
c. Recovery of
Impairment of €90,000.
d. Recovery of Impairment
of €200,000.
109. India Enterprises has four divisions. It
acquired one of them, Bombay Products, on January 1, 2011 for Rs400,000,000,
and recorded goodwill of Rs50,750,000 as a result of that purchase. At December
31, 2011, Bombay
products had a recoverable amount of Rs370,000,000. The carrying value of the
company’s net assets at December 31, 2011 was Rs355,000,000 (including goodwill).
What amount of loss on impairment of goodwill should India record in 2011?
a. Rs -0-
b. Rs15,000,000
c. Rs30,000,000
d. Rs45,000,000
110. Chow Company purchased the Chee Division in
2011 and appropriately recorded HK$5,000,000 of goodwill related to the
purchase. On December
31, 2011 , the recoverable amount of Chee Division is HK$58,000,000
and it is carried on Chow’s books for a total of HK$54,000,000, including the
goodwill. What goodwill impairment should be recognized by Chow in 2011?
a. HK$0.
b. HK$1,000,000.
c. HK$4,000,000.
d. HK$11,000,000.
111. On June 2, 2011 , Olsen Inc. purchased a trademark with a cost
€4,720,000. The trademark is
classified as an indefinite-life intangible asset. At December 31, 2011 and December 31, 2012 ,
the following is available for impairment testing:
Fair
value less costs to sell €4,560,000 €4,530,000
Value-in-use €4,680,000 €4,780,000
The
2012 income statement will report
a. no Impairment Loss
or Recovery of Impairment.
b. Impairment Loss of €40,000.
c. Recovery of
Impairment of €40,000.
d. Recovery of
Impairment of €100,000.
112. Tokyo Enterprises has four divisions. It
acquired on of them, Green Products, on January 1, 2011 for ¥480,000,000, and recorded
goodwill of ¥60,900 as a result of that purchase. At December 31, 2011 , Green
Products had a recoverable amount of ¥444,000,000. The carrying value of the Company’s
net assets at December
31, 2011 was ¥426,000,000(including goodwill). What amount of loss
on impairment of goodwill should Tokyo
record in 2011?
a. ¥ -0-
b. ¥18,000,000
c. ¥36,000,000
d. ¥54,000,000
Use the following information for questions 113 and 114.
On January
1, 2011 , Dillman Inc. purchased a patent with a cost €3,480,000, a useful life of 5 years. The company
uses straight-line depreciation. At December 31, 2012 , the company determines that
impairment indicators are present. The fair value less costs to sell the patent
is estimated to be €1,620,000. The patent's
value-in-use is estimated to be €1,695,000. The asset's
remaining useful life is estimated to be 2 years.
113. Bingham's 2012 income statement will report
Loss on Impairment of
a. €0.
b. €393,000.
c. €468,000
d. €1,695,000
114. The company's 2013 income statement will
report amortization expense for the patent of
a. €565,000.
b. €696,000.
c. €847,500.
d. €1,695,000.
115. On August 1, 2011 , Wei Inc. purchased a license
with a cost of HK$8,424,000 and a useful life of 10 years. At December 31,
2013, when the carrying value of the asset was HK$6,388,200, the company
determined that impairment indicators were present. The fair less costs to sell
the license was estimated to be HK$5,909,120. The asset's value-in-use is
estimated to be HK$6,084,000. Wei's 2013 income statement will report Loss on
Impairment of
a. HK$109,300.
b. HK$304,200.
c. HK$299,425.
d. HK$1,272,500.
Use the following information for questions 116 and 117.
On January
2, 2011 , Ace Inc. purchased a patent with a cost CHF1,880,000, and a useful life of 4 years. At December 31, 2011 ,
and December 31,
2012 , the company determines that impairment indicators are
present. The following information is available for impairment testing at each
year end:
Fair
value less cost to sell CHF1,430,000 CHF840,000
Value-in-use CHF1,500,000 CHF890,000
No changes were made in the asset's estimated useful
life.
116. The company's 2012 income statement will
report
a. Amortization
Expense of CHF470,000.
b. Amortization
Expense of CHF470,000 and Loss on Impairment of CHF20,000.
c. Amortization
Expense of CHF470,000 and a Recovery of Impairment of CHF90,000.
d. Loss on impairment
of 380,000.
117. The company's 2012 income statement will
report
a. Amortization
Expense of CHF470,000.
b. Amortization
Expense of CHF500,000 and Loss on Impairment of CHF110,000.
c. Amortization
Expense of CHF470,000 and a Loss of Impairment of CHF50,000.
d. Loss on impairment
of 140,000.
118. The following information is available for
Barkley Company’s patents:
Cost $1,520,000
Carrying amount 860,000
Recoverable amount 650,000
Barkley would record a loss on
impairment of
a. -0-
b. $210,000.
c. $660,000.
d. $870,000.
119. Harrel Company acquired a patent on an oil
extraction technique on January 1, 2010 for $5,000,000. It was expected to have a 10 year life and no
residual value. Harrel uses straight-line amortization for patents. On December 31, 2011 ,
the recoverable amount of the patent was estimated to be $4,500,000. At what
amount should the patent be carried on the December 31, 2011 balance sheet?
a. $5,000,000
b. $4,500,000
c. $4,000,000
d. $2,800,000
120. Malrom Manufacturing Company acquired a
patent on a manufacturing process on January 1, 2010 for $5,000,000. It was expected
to have a 10 year life and no residual value. Malrom uses straight-line
amortization for patents. On December 31, 2011 , the recoverable amount of the
patent was estimated to be $3,400,000. At what amount should the patent be
carried on the December
31, 2011 balance sheet?
a. $5,000,000
b. $4,500,000
c. $4,000,000
d. $3,400,000
121. In 2010,
Edwards Corporation incurred research and development costs as follows:
Materials and equipment $ 90,000
Personnel 120,000
Indirect costs 150,000
$360,000
These
costs relate to a product that will be marketed in 2011. It is estimated that
these costs will be recouped by December 31, 2013 , but its process has not
achieved economic viability. The equipment has no alternative future use. What is the amount of research and
development costs that should be expensed in 2010?
a. $0.
b. $210,000.
c. $270,000.
d. $360,000.
122. Hall
Co. incurred research and development costs in 2011 as follows:
Materials used in research and development
projects $ 450,000
Equipment acquired that will have alternate
future uses in future research
and
development projects 3,000,000
Depreciation for 2011 on above equipment 300,000
Personnel costs of persons involved in research
and development projects 750,000
Consulting fees paid to outsiders for research
and development projects 300,000
Indirect costs reasonably allocable to research
and development projects 225,000
$5,025,000
Assume
economic viability has not been achieved.
The
amount of research and development costs charged to Hall's 2011 income
statement should be
a. $1,500,000.
b. $1,900,000.
c. $2,025,000.
d. $4,500,000.
123. Loazia Inc. incurred the following costs
during the year ended December 31, 2011 :
Laboratory research aimed at discovery of new
knowledge $180,000
Costs of testing prototype and design
modifications (economic viability
not achieved) 45,000
Quality control during commercial production,
including routine testing
of
products 270,000
Construction of research facilities having an
estimated useful life of
6
years but no alternative future use 360,000
The total amount to be classified
and expensed as research and development in 2011 is
a. $555,000.
b. $855,000.
c. $585,000.
d. $285,000.
124. MaBelle Corporation incurred the following
costs in 2010:
Acquisition of R&D equipment with a
useful life of
4
years in R&D projects $600,000
Start-up costs incurred when opening
a new plant 140,000
Advertising expense to introduce a
new product 700,000
Engineering costs incurred to
advance a product to full
production
stage (economic viability not achieved) 400,000
What amount should MaBelle record as
research & development expense in 2010?
a. $ 550,000
b. $ 740,000
c. $1,000,000
d. $1,140,000
125. Leeper Corporation incurred the following
costs in 2010:
Acquisition of R&D equipment with a
useful life of
4
years in R&D projects $800,000
Cost of making minor modifications
to an existing product 140,000
Advertising expense to introduce a
new product 700,000
Engineering costs incurred to
advance a product to full
production
stage (economic viability not achieved) 600,000
What amount should Leeper record as research
& development expense in 2010?
a. $ 800,000
b. $ 940,000
c. $1,300,000
d. $1,640,000
126. Platteville Corporation has the following
account balances at 12/31/10 :
Amortization expense $ 10,000
Goodwill 140,000
Patent, net of $30,000 amortization 70,000
What amount should Platteville report for
intangible assets on the 12/31/10 statement of financial position?
a. $ 70,000
b. $100,000
c. $210,000
d. $220,000
Multiple
Choice Answers—Computational
Item
|
Ans.
|
Item
|
Ans.
|
Item
|
Ans.
|
Item
|
Ans.
|
Item
|
Ans.
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Item
|
Ans.
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84.
|
d
|
92.
|
b
|
100.
|
d
|
108.94.
|
c
|
116.
|
a
|
124.
|
a
|
85.
|
d
|
93.
|
c
|
101.94.
|
b
|
109.94.
|
b
|
117.
|
c
|
125.
|
a
|
86.
|
c
|
94.
|
b
|
102.94.
|
b
|
110.
|
a
|
118.
|
b
|
126.
|
c
|
87.
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d
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95.
|
b
|
103.94.
|
b
|
111.
|
c
|
119.
|
c
|
||
88.
|
c
|
96.
|
a
|
104.94.
|
c
|
112.
|
b
|
120.
|
d
|
||
89.
|
c
|
97.
|
b
|
105.94.
|
b
|
113.
|
b
|
121.
|
d
|
||
90.
|
b
|
98.
|
c
|
106.94.
|
a
|
114.
|
c
|
122.
|
c
|
||
91.
|
b
|
99.
|
c
|
107.94.
|
c
|
115.
|
b
|
123.
|
c
|
84. d $30,000
+ $1,000 = $31,000.
85. d $25,000
+ $900 = $25,900.
86. c (2,500
x $9) + $75,000 = $97,500.
87. d $360,000
x ($240,000 / $320,000) = $270,000.
88. c ($120,000
÷ 10) × 2 2/3 = $32,000.
89. c ($210,000
÷ 10) × 2 2/3 = $56,000.
90. b $40,000
÷ 10 = $4,000.
91. b $90,000
– [($90,000 ÷ 10) × 1 1/3] = $78,000.
($78,000
+ $22,000) ÷ 5 = $20,000.
92. b $450,000
– [($450,000 ÷ 10) × 1 1/3] = $390,000.
($390,000
+ $110,000) ÷ 5 = $100,000.
93. c $30,000
+ $390,000 + $90,000 = $510,000.
94. b ($720,000
÷ 10) × 5 = $360,000.
95. b [($360,000
– $36,000) + $162,000] ÷ 12 = $40,500.
96. a $1,000,000
÷ 10 = $100,000.
97. b $1,800,000
– [($1,800,000 ÷ 6) × 2] = $1,200,000.
$1,200,000
÷ 20 = $60,000.
98. c ($5,000,000
+ $300,000) – $2,000,000 = $3,300,000
$5,100,000
– $3,300,000 = $1,800,000.
99. c ($6,000,000
+ $400,000) – $2,500,000 = $3,900,000.
$6,100,000
– $3,900,000 = $2,200,000.
100. d $620,000
+ $60,000 + $45,000 = $725,000.
$800,000
– $725,000 = $75,000.
101. b $1,500,000
– $1,000,000 = $500,000 gain.
102. b €13,985,000
– (€12,620,000 + €560,000 + €245,000) = 560,000
103. b €1,160,000/ 5 = €232,000 × 2 = €464,000;
€1,160,000 – €464,000 = €696,000; €696,000 – €565,000 = €131,000
104. c €565,000/ 2 = €282,500
105. b HK$3,992,625 – HK$3,802,500 = HK$190,125
106. a CHF940,000/ 4 = CHF235,000; CHF940,000
– CHF235,000 = CHF705,000
107. c CHF705,000 – CHF235,000 = CHF470,000; CHF470,000
– CHF445,000 = CHF25,000
108. c €9,440,000 – €9,350,000 = €90,000
109. b Rs370,000,000 – Rs355,000,000 = Rs15,000,000
110. a HK$58,000,000 > HK$54,000,000
111. c €4,720,000 – €4,680,000 = €40,000
112. b ¥444,000,000 – ¥426,000,000 = ¥18,000,000
113. b €3,480,000/ 5 = €696,000 × 2 = €1,392,000;
€3,480,000 – €1,392,000 = €2,088,000; €2,088,000 – €1,695,000 = €393,000
114. c €1,695,000/ 2 = €847,500
115. b HK$6,388,200 – HK$6,084,000 = HK$304,200
116. a CHF1,880,000/ 4 = CHF470,000; CHF1,880,000
– CHF470,000 = CHF1,410,000
117. c CHF1,410,000 – CHF470,000 = CHF940,000;
CHF940,000 – CHF890,000 = CHF50,000
118. b $860,000 – $650,000 = $210,000.
119. c $5,000,000
– [($5,000,000 ÷ 10) 2] = $4,000,000.
120. d $5,000,000
– [($5,000,000 ÷ 10) × 2] = $4,000,000.
Since
$4,000,000 > $3,400,000, patent is reported at $3,400,000.
121. d Expense
total of $360,000.
122. c $5,025,000
– $3,000,000 = $2,025,000.
123. c $180,000
+ $45,000 + $360,000 = $585,000.
124. a ($600,000
÷ 4) + $400,000 = $550,000.
125. a ($800,000
÷ 4) + $600,000 = $800,000.
126. c $140,000
+ $70,000 = $210,000.
