ТHEME 8.

2
MULTIPLE CHOICE QUESTIONS

1.Goodwill
a. is only recorded when generated internally.
b. can be subdivided and sold in parts.
c. can only be identified with the business as a whole.
d. can be defined as normal earnings less accumulated amortization.

2.Research and development costs

a. are classified as intangible assets.
b. must be expensed when incurred under generally accepted accounting principles.
c. should be included in the cost of the patent they relate to.
d. are capitalized and then amortized over a period not to exceed 20 years.
3.Goodwill
a. may be expensed upon purchase if desired.
b. can be sold by itself to another company.
c. can be purchased and charged directly to stockholders’ equity.
d. is only recorded when the purchase of an entire business occurs.

4.Which of the following is not classified as an intangible asset on the balance sheet?
a. Goodwill
b. Trademark
c. Employees
d. Copyrights
5.Given the following account balances at year-end, compute the total intangible assets on the
balance sheet of Janssen Enterprises.
Cash $1,500,000
Accounts Receivable 1,000,000
Trademarks 1,200,000
Goodwill 2,500,000
Research & Development Costs 2,000,000
a. $9,700,000
b. $5,700,000
c. $3,700,000
d. $7,700,000
6.Intangible assets are the rights and privileges that result from ownership of long-lived assets
that
a. must be generated internally.
b. are depreciated over their useful life.
c. have been exchanged at a gain.
d. do not have physical substance.
7.Goodwill can be recorded
a. when customers keep returning because they are satisfied with the company's
products.
b. when the company acquires a good location for its business.
c. when the company has exceptional management.
d. only when there is an exchange transaction involving the purchase of an entire
business.

8.An asset that cannot be sold individually in the marketplace is

a. a patent.
 b. goodwill.
c. a copyright.
d. a trade name.

9.On May 1, 2022, Irwin Company purchased the copyright to Quick Computer Tutorials for
$120,000. It is estimated that the copyright will have a useful life of 5 years. The amount
of amortization expense recognized for the year 2022 would be
a. $24,000.
b. $16,000.
c. $12,000.
d. $12,800.

10.Which of the following is not considered an intangible asset?

a. Goodwill
b. An oil well
c. A franchise
d. A patent

11.Cost allocation of an intangible asset is referred to as

a. amortization.
b. depreciation.
c. accretion.
d. capitalization.
12.A patent
a. has a legal life of 20 years.
b. is not amortized.
c. can be renewed indefinitely.
d. is rarely subject to litigation because it is an exclusive right.

13.If a company incurs legal costs in successfully defending its patent, these costs are recorded
by debiting
a. Legal Expense.
b. the Intangible Loss account.
c. the Patent account.
d. a revenue expenditure account.

14.Trademarks are generally shown on the balance sheet under

a. Intangibles.
b. Investments.
c. Property, Plant, and Equipment.
d. Current Assets.
15.Intangible assets
a. should be reported under the heading Property, Plant, and Equipment.
b. are not reported on the balance sheet because they lack physical substance.
c. should be reported as Current Assets on the balance sheet.
d. should be reported as a separate classification on the balance sheet.