MULTIPLE CHOICE THEORIES

1. PAS 38 applies to
a. Intangible assets that are not within the scope of another
Standard.
b. Financial assets, as defined in PAS 32 Financial Instruments:
Presentation.
c. The recognition and measurement of exploration and
evaluation assets.
d. Expenditure on the development and extraction of minerals,
oil, natural gas
and similar non-regenerative resources.
2. Which is not within the definition of an intangible asset?
a. Identifiable nonmonetary asset without physical substance
b. A resource controlled by an entity as a result of past event
c. A resource from which future economic benefits are expected
to flow to the
entity
d. Held for use in the production or supply of goods or services,
for rental to
others, or for administrative purposes.
3. Which item listed below does not qualify as an intangible
asset?
a. Computer software
b. Registered patent
c. Copyrights that are protected
d. Notebook computer
4. Which of the following items qualify as an intangible asset
under PAS 38?
a. Advertising and promotion on the launch of a huge product
b. College tuition fees paid to employees who decide to enroll in
an executive
M.B.A. program at Harvard University while working with the
company
c. Operating losses during the initial stages of the project
d. Legal costs paid to intellectual property lawyers to register a
patentNATIONAL POLYTECHNIC UNIVERSITY (NU) OF
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5. The cost of an intangible asset is composed of
a. Purchase price excluding import duties and nonrefundable
taxes
b. Purchase price including import duties and nonrefundable
taxes
c. Purchase including both refundable and nonrefundable taxes
d. Purchase price including trade discounts and rebates
6. Which is incorrect concerning the recognition and
measurement of an intangible
asset?
a. If an intangible asset is acquired separately, the cost
comprises its purchase
price, including import duties and taxes and any directly
attributable
expenditure of preparing the asset for its intended use.
b. If an intangible asset is acquired in a business combination
that is an
acquisition, the cost is based on its fair value at the date of
acquisition.
c. If an intangible asset is acquired free of charge or by way of
government
grant, the cost is equal to its fair value.
d. If payment for an intangible asset is deferred beyond normal
credit terms, its
cost is equal to the total payments over the credit period.
7. The cost of internally generated intangible asset includes the
following, except
a. Cost of materials and services used or consumed in generating
the intangible
asset
b. Expenditure on training staff to operate the asset
c. Cost to register a legal right
d. Salaries, wages and other employment related costs of
personnel directly
engaged in generating the asset
8. Legal fees incurred by a company in defending its patent
rights should be
expensed when the outcome of the litigation is
Successful Unsuccessful
a. Yes Yes
b. Yes No
c. No No
d. No Yes
9. When an internally generated asset meets the recognition
criteria, the
appropriate treatment for costs previously expensed is:
a. Reinstatement.
b. No adjustment as these amounts may not be reinstated.
c. Include in the cost of the development of the asset.
d. Capitalize into the cost of the asset and adjust the opening
balance of
retained earnings.
10. According to the definition provided in PAS 38 Intangibles,
activities
undertaken in the ‘research’ phase of the generation of an asset
may include:
a. The application of knowledge to a design for the production of
new materials.
b. The use of research findings to create a substantially improved
product.
c. Using knowledge to materially improve a manufacturing
device.
d. Original and planned investigation with the prospect of gaining
new scientific
knowledge.
11. Which statement is correct regarding initial recognition of
research and
development costs?
a. All research costs should be charged to expense.NATIONAL
POLYTECHNIC UNIVERSITY (NU) OF THE PHILIPPINES
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b. All development costs should be capitalized.
c. If an enterprise cannot distinguish the research phase of an
internal project to
create an intangible asset from the development phase, the
enterprise treats
the expenditure for that project as if it were incurred in the
development
phase only.
d. A research and development project acquired in a business
combination is not
recognized as an asset.
12. According to PAS 38 Intangibles, in order to be able to
capitalize development
outlays an entity must be able to demonstrate the following:
I. Technical feasibility and intention of completing the asset so it
will be
available for use or sale.
II. Its ability to reliably measure the expenditure on the
development of the
asset.
III. Ability to use or sell the asset.
IV. How the asset will generate probable future economic
benefits.
a. I, II and IV only
b. II, and IV only
c. II, III and IV only
d. I, II, III and IV
13. Which of the following would be considered research and
development?
a. Routine efforts to refine an existing product.
b. Periodic alterations to existing production lines.
c. Marketing research to promote a new product.
d. Construction of prototypes.
14. Which of the following costs would be capitalized?
a. Acquisition cost of equipment to be used on current research
project only.
b. Engineering costs incurred to advance the product to the full
production stage.
c. Cost of research to determine whether a market for the
product exists.
d. Salaries of research staff.
15. If a company constructs a laboratory building to be used as a
research and
development facility, the cost of the laboratory building is
matched against
earnings as
a. Research and development expense in the period(s) of
construction.
b. Depreciation deducted as part of research and development
costs.
c. Depreciation or immediate write-off depending on company
policy.
d. An expense at such time as productive research and
development has been
obtained from the facility.
16. PAS 38 Intangibles, prohibits the recognition of the following
internally
generated identifiable intangibles:
I. Brands II. Mastheads III. Publishing titles IV. Customer lists
a. I, II and IV only
b. II, and IV only
c. II, III and IV only
d. I, II, III and IV only
17. Operating losses incurred during the start-up years of a new
business should
be
a. Accounted for and reported like the operating losses of any
other business.
b. Written off directly against retained earnings.
c. Capitalized as a deferred charge and amortized over five
years.
d. Capitalized as an intangible asset and amortized over a period
not to exceed
20 years.NATIONAL POLYTECHNIC UNIVERSITY (NU) OF
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18. Start-up costs include organizational costs, such as legal and
state fees
incurred to organize a new business entity. These costs should be
a. Capitalized and never amortized.
b. Capitalized and amortized over 40 years.
c. Capitalized and amortized over 5 years.
d. Expensed as incurred.
19. Which statement is correct concerning the amortization of an
intangible asset?
I. The cost less residual value of an intangible asset with a finite
useful life
should be amortized over that life
II. An intangible asset with an indefinite useful life should not be
amortized.
III. The maximum amortization period cannot exceed twenty
years.
a. I only
b. I and II only
c. I and III only
d. Neither I, II nor III
20. A consideration not relevant in determining the useful life of
the intangible
asset is the
a. The period of control over the asset and legal or similar limits
on the use of
the asset
b. Technical, technological, commercial or other types of
obsolescence
c. Expected actions of competitors or potential competitors
d. Initial cost
21. Which of the following factors should not be considered in
determining the
useful life of an intangible asset?
a. Effects of obsolescence, changes in market demand for the
product
b. The salvage value of the asset
c. Expected actions of competitors and potential competitors
d. The period of control over the asset and legal or similar limits
on the use of
the asset, such as expiry dates of related leases or contractual or
regulatory
provisions.
22. The residual value of an intangible asset
a. Is always equal to zero
b. Is equal to zero unless a third party commits to buy the asset
at the end of its
useful life and there is an active market for the asset
c. Is equal to zero unless a third party commits to buy the asset
at the end of its
useful life or there is an active market for the asset
d. May be increased for the purpose of computing amortization
amount
23. The method of amortization used for an intangible asset with
a finite life
a. Should always be the straight-line method
b. Need not reflect the pattern of use of the asset
c. Should be the straight-line method if the pattern of use cannot
be determined
reliably
d. Should always be the units of production method
24. Goodwill may be recorded when:
a. It is identified within a company.
b. One company acquires another in a business combination.
c. The fair value of a company’s assets exceeds their cost.
d. A company has exceptional customer relations.NATIONAL
POLYTECHNIC UNIVERSITY (NU) OF THE PHILIPPINES
(PUP)
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25. The reason goodwill is sometimes referred to as a master
valuation account is
because
a. It represents the purchase price of a business that is about to
be sold.
b. It is the difference between the fair value of the net
identifiable assets as
compared with the purchase price of the acquired business.
c. The value of a business is computed without consideration of
goodwill and
then goodwill is added to arrive at a master valuation.
d. It is the only account in the financial statements that is based
on value, all
other accounts are recorded at an amount other than their value.
26. Which of the following intangible assets should be shown as a
separate item
on the statement of financial position?
a. Goodwill b. Franchise c. Patent d. Trademark
27. Which of the following disclosures is not required by PAS 38?
a. Useful lives of the intangible assets
b. Reconciliation of carrying amount at the beginning and the end
of the year
c. Contractual commitments for the acquisition of intangible
assets
d. Fair value of similar intangible assets used by its competitors