INTERMEDIATE ACCOUNTING II

WEEK 6: PRACTICE QUIZ CHAPTER 12

1. Intangible assets are normally classified as long-term assets.

A. True

B. False

2. Which of the following is not a characteristic of intangible assets?

A. They lack physical existence.

B. They are not financial instruments.

C. They are long-term in nature

D. They are all subject to amortization.

3. Which of the following is not a characteristic of intangible assets?

A. They are classified as long-term assets.

B. They lack physical existence.

C. They are not financial instruments.

D. All of the above are correct.

4. Which of the following is not a factor to be considered in determining a limited-life

intangible asset's useful life?
A. Any legal provisions that may limit the useful life.

B. The expected useful life of any related asset.

C. The effects of obsolescence.

D. All of the above are correct.

5. Which of the following statements is correct concerning intangible assets?

 Has physical characteristics, are not financial instruments, and are only created
A.
internally.
Has physical characteristics, is reported on financial reports, and are only created
B.
internally.
Has no physical characteristics, is reported on financial reports, and can be created
C.
internally or externally.
Has physical characteristics, are financial instruments, and can be created internally
D.
or externally.

6. Which of the following is not a characteristic of intangible assets?

A. They lack physical existence.

B. They are not financial instruments.

C. They are long-term in nature

D. They are all subject to amortization.

7. Annual payments made under a franchise agreement should be capitalized.

A. True

B. False

8. If a company acquires intangibles for stock or in exchange for other assets, the cost of the
intangible is the fair value of the consideration given or the fair value of the intangible
received, whichever is more clearly evident.
A. True

B. False

9. A company charges legal fees and other costs incurred in successfully defending a trademark
to Legal Expense.
A. True

B. False
10. Which of the following costs would not be included in the cost of a patent?
A. Filing fees.

B. Research and development costs related to product development.

C. Legal fees to file for patent protection.

D. Purchase price.

11. Unrecovered legal fees and other costs incurred in successfully defending a copyright are
debited to:
A. Accumulated Amortization – Copyright.

B. Legal Expense.

C. a loss account.

D. Copyright.

12. Costs incurred internally to create intangibles are

A. capitalized.

B. capitalized if they have an indefinite life.

C. expensed as incurred.

D. expensed only if they have a limited life.

13. Dyer Corporation acquired a patent on October 31, 2012. The patent had an appraised value
of $1,225,000. Dyer paid cash of $1,205,000 to the seller to acquire the patent as well as
legal fees of $3,500 related to the acquisition. What amount should be capitalized for the
patent?
A. $3,500

B. $1,228,500

C. $1,205,000

D. $1,208,500 ($1,205,000+$3,500)
14. A patent should be amortized over the greater of its useful life or their legal life.
A. True

B. False

15. The total cost of a trademark or trade name may be expensed rather than capitalized.
A. True

B. False

16. The residual value of an intangible asset should be assumed to be zero unless its useful life
is less than its economic life.
A. True

B. False

17. Bryson Corporation purchased a limited-life intangible asset for $2,325,000 on May 1,
2010. It has a remaining useful life of 15 years. What total amount of amortization expense
should have been recorded on the intangible asset by December 31, 2012?
A. $133,333

B. $258,333

C. $310,000

D. $413,333 ($2,325,000/ 180 months x 32 months)

18. Which of the following is an example of a limited life intangible asset?

A. Goodwill.

B. Trademark.

C. Trade name.

D. Patent.
19. Tangipahoa Corporation acquired a patent on January 1, 2012. Tangipahoa paid cash of
$21,225,000 to the seller to acquire the patent. The remaining legal life of the patent is 15
years. Tangipahoa expects that the patent will be obsolete in 10 years. What amount of
amortization expense will Tangipahoa record for 2012?
A. $707,500

B. $1,061,250

C. $1,415,000

D. $2,212,500 ($21,225,000/10 years)

20. Factors considered in determining an intangible asset's useful life include all of the
following except
A. the expected use of the asset.

B. any legal or contractual provisions that may limit the useful life.

C. any provisions for renewal or extension of the asset's legal life

D. the amortization method used.

21. On July 2, 2012, Shelby Company bought a trademark from Randolph, Inc. for $5,500,000.
An independent research company estimated that the remaining useful life of the trademark
was 10 years. Its unamortized cost on Royce's books was $3,200,000. In Shelby's 2012
income statement, what amount should be reported as amortization expense?
A. $160,000.

B. $275,000. ($5,500,000/10 years x 6/12)

C. $320,000.

D. $550,000.

22. Tiburon Corporation purchased a patent for $925,000 on November 30, 2010. It has a
remaining legal life of 11 years. Tiburon estimates that the remaining useful life of the
patent is useful life of 15 years. What balance will be reported on the December 31, 2012
balance sheet for the patent?
A. $925,000
 B. $791,389.

C. $796,528. ($925,000/180 months x 25 months=$128,472. $925,000 - $128,472)

D. $742,803.

23. Customer lists and production backlogs are examples of contract-related intangible assets.
A. True

B. False

24. Copyrights are renewable.

A. True

B. False

25. Which of the following is not an example of a limited-life intangible asset?

A. Patent.

B. Franchise.

C. Goodwill.

D. Copyright.

26. Which of the following is not one of the major categories of intangibles?
A. Contract-related.

B. Financing-related.

C. Artistic-related.

D. Marketing-related.

27. All of the following represent federally granted rights except:

 A. copyrights.

B. goodwill.

C. patents.

D. trademarks.

28. Which of the following would be amortized?

A. Goodwill.

B. Trademark.

C. Trade name.

D. Customer List.