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34 Cards in this Set
- Front
- Back
When an intangible asset is acquired in an exchange transaction, initial recognition is at the |
Fair value of the more clearly evident of the consideration given or the asset acquired. |
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Externally acquired intangibles other than goodwill are initially recorded |
At acquisition costs plus and incidentals |
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Internally developed intangibles other than goodwill are initially recorded |
At the amount of incindentals costs (legal fees)only. R&D costs are expensed as incurred. |
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Organization and start up costs are |
Under Tax Code: Capitalized and amortized over a period of not less than 15 years Financial Accounting Purposes: All expensed |
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Which of the following expenditures qualifies for asset capitalization? A.Salaries of engineering staff developing a new product. B.Costs of testing a prototype and modifying its design. C.Cost of materials used in prototype testing. D.Legal costs associated with obtaining a patent on a new product. |
Answer (D) is correct. |
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On an intangible asset with indefinite life, impairment is |
Carrying amount - Fair value. The Undiscounted future inflows is not considered |
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The amortization period for a patent is |
The shorter of the useful life of legal life remaining |
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Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if A.An active market exists for the intangible asset. B.The intangible asset is a monetary asset. C.The cost of the intangible asset can be measured reliably. D.The useful life of the intangible asset can be reliably determined. |
Answer (A) is correct. |
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Successful litigation costs are capitalized/Expensed? UnSuccessful litigation costs are capitalized/Expensed? |
Successful litigation costs are capitalized UnSuccessful litigation costs are Expensed |
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Which of the following costs of goodwill should be capitalized and amortized?
Maintaining Goodwill Developing Goodwill |
Goodwill arising from a business combination must be capitalized. However, amortization of goodwill is prohibited. Moreover, the cost of developing, maintaining, or restoring intangible assets (including goodwill) that (1) are not specifically identifiable, (2) have indeterminate useful lives, or (3) are inherent in a continuing business and related to an entity as a whole are expensed as incurred |
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An entire acquired entity is sold. The goodwill remaining from the acquisition should be A.Charged to retained earnings of the current period. B.Charged to retained earnings of prior periods. C.Expensed in the period sold. D.Included in the carrying amount of the net assets sold. |
Answer (D) is correct. |
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R&D expenses include |
1. R&D performed under contract by others 2. Design, construction, and testing of prototypes 3. Testing in search for new products. |
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Which of the following is a research and development cost? A.Research and development performed under contract for others. B.Market research related to a major product for the company. C.Development or improvement of techniques and processes. D.Offshore oil exploration that is the primary activity of a company. |
C.Development or improvement of techniques and processes. |
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Research is defined as planned search or critical investigation. It is aimed at discovery of new knowledge with the hope that it will be useful in |
(1) developing a new product, service, process, or technique or (2) in bringing about a significant improvement in an existing product, service, process, or technique. |
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During the current year, Lyle Co. incurred $204,000 of research and development costs in its laboratory to develop a patent that was granted on July 1. Legal fees and other costs associated with registration of the patent totaled $41,000. The estimated useful life of the patent is 10 years. What amount should Lyle capitalize for the patent on July 1? |
R&D costs are required to be expensed as they are incurred. Legal fees and registration fees are excluded from the definition of R&D. Thus, the $41,000 in legal fees and other costs associated with the registration of the patent should be capitalized. The $204,000 in R&D costs should be expensed. |
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Equipment purchased for current and future projects
Equipment purchased for current projects only
Are these both R&D expense |
Equipment purchased for current projects only is R&D expense
Equipment purchased for current and future projects should be capitalized and depreciated |
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Equipment purchased for current and future projects $100,000 Equipment purchased for current projects only 200,000 Research and development salaries for current project 400,000 Equipment has a 5-year life and is depreciated using the straight-line method. What amount should Brand record as depreciation for research and development projects at December 31? |
20,000 R&D costs must be expensed as incurred. The costs of equipment acquired for a particular project and having no alternative future uses and salaries of personnel engaged in R&D are R&D costs. They are expensed when incurred. The costs of equipment acquired for R&D and having alternative future uses are not R&D costs. They are capitalized as tangible assets and depreciated accordingly. Thus, the recorded depreciation is $20,000 ($100,000 ÷ 5 years). |
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R&D costs must be expensed as incurred. But this rule does not apply to |
(1) R&D activities conducted for others or (2) assets acquired in a business combination that are used in R&D activities |
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Laboratory research aimed at discovery of new knowledge $75,000 Design of tools, jigs, molds, and dies involving new technology 22,000 Quality control during commercial production, including routine testing 35,000 Equipment acquired 2 years ago, having an estimated useful life of 5 years with no salvage value, used in various R&D projects 150,000 Research and development services performed by Stone Co. for Metal, Inc. 23,000 Research and development services performed by Metal, Inc., for Clay Co. 32,000 What amount of research and development expenses should Metal report in its current-year income statement? |
150,000 The depreciation on the equipment used in R&D projects is considered an R&D expense in the current period. |
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Software to be marketed should be _______ before technological feasibility, __________ after technological feasibility, and ____________ for costs incurred to prepare the product for sale |
Expensed, Capitalized, inluded in inventory. |
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For software to be marketed annual amortization is the greater of |
a) Total capitalized costs time the revenue ratio ( annual gross software revenue/ total projected gross revenue) or b) Total capitalized cost divided by the estimated economic life of the software (straightline) |
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Software to be used internally Costs expensed are |
1) costs incurred during prelim project stage and 2) Costs incurred for training and maintenance
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Software to used internally Costs capitalized are |
1) costs incurred durring the application development stage (external direct costs, payroll associated withteh project, interest costs associated with the project). |
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Software to used internally Annual amortization is determined on |
a straight line basis |
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Direct response advertising costs should be capitalized if |
a) The primary purpose is to generate sales from customers who specifically respond to the advertising and b) probable future benefits result. |
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Deficits accumulated during the development stage of an entity should be |
Reported as a part of equity. |
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Financial reporting by a development stage enterprise differs from financial reporting for an established operating enterprise in regard to disclosures |
Only. A development stage enterprise must present financial statements in conformity with GAAP together with certain additional information accumulated since the inception. Cumulative net losses must be disclosed in the equity section of the balance sheet, cumulative amounts of revenue and expense in the income statement, cumulative amounts of cash inflows and outflows in the statement of cash flows, and information about each issuance of stock in the statement of equity. |
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A statement of cash flows for a development stage entity |
Is the same as that of an established operating entity and, in addition, shows cumulative amounts from the entity’s inception. |
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Research is defined as planned search or critical investigation. It is aimed at discovery of new knowledge with the hope that it will be useful in
Development is defined as |
(1) developing a new product, service, process, or technique or (2) in bringing about a significant improvement in an existing product, service, process, or technique.
a translation of research findings or other knowledge into a plan or design for a new or improved product or process. |
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An impairment test for a nonamortized intangible asset does not consider recoverability TorF |
T A nonamortized intangible asset must be reviewed for impairment at least annually. It is tested more often if events or changes in circumstances suggest that the asset may be impaired. This impairment test does not consider recoverability. |
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In the calculation of the gain or loss on disposal of a reporting unit, goodwill is included as part of its carrying amount. T or F |
T In the calculation of the gain or loss on disposal of a reporting unit, goodwill is included as part of its carrying amount. |
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Costs of software to be marketed are subject to three treatments: |
Expensed as incurred Capitalized as computer software costs Included in inventory |
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Costs incurred to produce the product for sale (duplication of software, training materials, packaging) are capitalized/Expensed as inventory |
Capitalized |
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Costs of software for internal use in the preliminary project stage are expensed as incurred or capitalized? |
expensed as incurred. |