Intangible Assets Quiz
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Questions and Answers

What is a characteristic of intangible assets?

  • They are always classified as short-term assets
  • They are tangible in nature
  • They are always financial instruments
  • They lack physical existence (correct)

    • How are purchased intangibles typically recorded?

  • At a discounted value to reflect their intangible nature
  • At market value on the acquisition date
  • At a nominal value to avoid overstatement of assets
  • At cost, including necessary expenses to make the asset ready for use (correct)

    • How are internally created intangibles generally accounted for?

  • Not accounted for until they are sold or licensed
  • Recorded at a higher value to incentivize internal development
  • Recorded at market value to reflect their true worth
  • Recorded at cost and generally expensed (correct)

    • Which of the following is a common type of intangible asset?

    <p>Patents</p> Signup and view all the answers

    How are internally created intangibles generally accounted for?

    <p>Recorded at cost and generally expensed</p> Signup and view all the answers

    What costs are typically included in the valuation of purchased intangibles?

    <p>Purchase price, legal fees, and other incidental expenses</p> Signup and view all the answers

    What costs are typically included in the valuation of purchased intangibles?

    <p>Purchase price, legal fees, and other necessary incidental expenses</p> Signup and view all the answers

    How are internally created intangibles generally accounted for?

    <p>Recorded at cost and generally expensed</p> Signup and view all the answers

    Which of the following is a characteristic of intangible assets?

    <p>They lack physical existence</p> Signup and view all the answers

    How should limited-life intangibles be amortized?

    <p>To expense over useful life</p> Signup and view all the answers

    What is the treatment of indefinite-life intangibles?

    <p>No amortization</p> Signup and view all the answers

    When should companies evaluate limited-life intangibles for impairment?

    <p>Regularly, based on events or changes in circumstances</p> Signup and view all the answers

    How should limited-life intangibles be amortized?

    <p>To expense over useful life</p> Signup and view all the answers

    What is the treatment of indefinite-life intangibles?

    <p>No amortization</p> Signup and view all the answers

    What should companies evaluate limited-life intangibles for?

    <p>Impairment</p> Signup and view all the answers

    How should limited-life intangibles be amortized?

    <p>To expense over useful life</p> Signup and view all the answers

    When should companies evaluate limited-life intangibles for impairment?

    <p>At least annually</p> Signup and view all the answers

    What is the treatment of indefinite-life intangibles?

    <p>No amortization</p> Signup and view all the answers

    Which of the following is an example of marketing-related intangible assets?

    <p>Trademarks</p> Signup and view all the answers

    How are marketing-related intangible assets like trademarks typically treated in terms of amortization?

    <p>No amortization</p> Signup and view all the answers

    What is the treatment of indefinite-life intangible assets in the U.S.?

    <p>Indefinite number of 10 year renewal periods</p> Signup and view all the answers

    How are marketing-related intangible assets like trademarks typically treated in terms of amortization?

    <p>They are not subject to amortization</p> Signup and view all the answers

    What is the capitalization and renewal period treatment for marketing-related intangible assets in the U.S.?

    <p>Capitalize acquisition costs and renew indefinitely</p> Signup and view all the answers

    What is the treatment of indefinite-life intangible assets in the U.S.?

    <p>They are not subject to amortization</p> Signup and view all the answers

    How are acquisition costs of customer-related intangible assets capitalized?

    <p>They are capitalized</p> Signup and view all the answers

    How are customer lists typically amortized?

    <p>Amortized over the useful life</p> Signup and view all the answers

    In the given illustration, how is the purchase of the customer list and the amortization recorded?

    <p>Purchase of the customer list and amortization are recorded at the end of each year</p> Signup and view all the answers

    How should the acquisition costs of customer-related intangible assets be capitalized?

    <p>Amortized over the useful life</p> Signup and view all the answers

    What is an example of a customer-related intangible asset?

    <p>Order backlog</p> Signup and view all the answers

    How should the amortization of customer-related intangible assets be recorded?

    <p>Amortized to expense over useful life</p> Signup and view all the answers

    How long is the copyright granted for artistic-related intangible assets?

    <p>Life of the creator plus 70 years</p> Signup and view all the answers

    How should a franchise with an indefinite life be accounted for?

    <p>Carried at cost and not amortized</p> Signup and view all the answers

    What is an example of a contract-related intangible asset?

    <p>Broadcast rights</p> Signup and view all the answers

    How long is the copyright granted for artistic-related intangible assets?

    <p>Life of the creator plus 70 years</p> Signup and view all the answers

    How should a franchise with an indefinite life be accounted for?

    <p>Carried at cost and not amortized</p> Signup and view all the answers

    What are examples of contract-related intangible assets?

    <p>Construction permits and service contracts</p> Signup and view all the answers

    How long is the copyright granted for artistic-related intangible assets?

    <p>Life of the creator plus 70 years</p> Signup and view all the answers

    How should a franchise with an indefinite life be accounted for?

    <p>Carried at cost and not amortized</p> Signup and view all the answers

    What should be the treatment for limited-life intangibles?

    <p>Amortized to expense over the life of the intangible</p> Signup and view all the answers

    Which of the following is an example of a marketing-related intangible asset?

    <p>Trademark</p> Signup and view all the answers

    How are internally created intangibles generally accounted for?

    <p>Expensed as incurred</p> Signup and view all the answers

    What is the treatment of indefinite-life intangible assets in the U.S.?

    <p>Subject to annual impairment testing</p> Signup and view all the answers

    What should companies evaluate limited-life intangibles for?

    <p>Impairment</p> Signup and view all the answers

    How would the unrecovered costs of a successful legal suit to protect the patent generally be reported in the financial statements?

    <p>Intangible</p> Signup and view all the answers

    What is the correct classification for the cost of developing a patent?

    <p>Expense</p> Signup and view all the answers

    How should the amount to be reported as research and development expense be computed for the given scenario?

    <p>$56,000</p> Signup and view all the answers

    What would be the correct classification for the cost of equipment acquired that will have alternative uses in future R&D projects over the next 5 years?

    <p>Total R&amp;D Expense</p> Signup and view all the answers

    Which intangible asset is renewed every 10 years with no amortization?

    <p>Trademarks</p> Signup and view all the answers

    How are customer-related intangible assets typically treated?

    <p>Amortized over their useful life</p> Signup and view all the answers

    What is the treatment of artistic-related intangible assets?

    <p>Amortized over their useful life</p> Signup and view all the answers

    How are contract-related intangible assets typically amortized?

    <p>Amortized over their useful life</p> Signup and view all the answers

    What is the purpose of goodwill in accounting?

    <p>To represent future economic benefits from acquired assets</p> Signup and view all the answers

    How are technology-related intangible assets typically amortized?

    <p>Amortized over their useful life</p> Signup and view all the answers

    What is the treatment of indefinite-life intangibles?

    <p>Tested for impairment annually</p> Signup and view all the answers

    How are limited-life intangibles typically amortized?

    <p>Amortized over their useful life</p> Signup and view all the answers

    What is the excess of purchase cost over the fair value of identifiable net assets acquired known as?

    <p>Goodwill</p> Signup and view all the answers

    Which of the following is an example of an artistic-related intangible asset?

    <p>Plays</p> Signup and view all the answers

    What is the main category of intangible assets that includes customer-related assets?

    <p>Customer-related</p> Signup and view all the answers

    Under IFRS, what is required for some development costs of intangibles?

    <p>Capitalization</p> Signup and view all the answers

    Study Notes

    Intangible Assets Accounting Overview

    • Intangible assets include patents, copyrights, trademarks, goodwill, and more.
    • Costs to make intangible assets ready for use are capitalized, including purchase price and legal fees.
    • Limited-life intangibles are amortized over useful life, while indefinite-life intangibles are tested for impairment annually.
    • IFRS requires capitalization of some development costs for intangibles.
    • Six major categories of intangible assets include marketing-related, customer-related, artistic-related, contract-related, technology-related, and goodwill.
    • Marketing-related intangible assets can include trademarks and trade names, and are renewed every 10 years with no amortization.
    • Customer-related intangible assets, like customer lists, are amortized over their useful life.
    • Artistic-related intangible assets, such as plays and literary works, are amortized over useful life.
    • Contract-related intangible assets, like franchise agreements, are amortized over the life of the franchise.
    • Technology-related intangible assets, such as patented technology, are amortized over the patent's useful life.
    • Goodwill represents future economic benefits from acquired assets and is recorded in business combinations.
    • Goodwill is the excess of purchase cost over the fair value of identifiable net assets acquired.

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    Description

    Test your knowledge of intangible assets with this quiz. Learn about the characteristics and valuation of intangibles such as patents, copyrights, trademarks, and goodwill. Understand how these assets are recorded and classified on the balance sheet.

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