PSBA Integrated Review
Financial Accounting and Reporting – Theory
Intangible Assets and Research and Development
Christian Aris Valix
1. An intangible asset is identifiable when
a.
b.
c.
d.
It is separable
It arises from contractual or other legal rights
Either a or b
None of the above
2. The cost of a separately acquired intangible asset comprises the purchase price and
a.
b.
c.
d.
Directly attributable cost of preparing the asset for the intended use
Administration and other general overhead cost
Cost of conducting a business in a new location
Cost of introducing a new product or service
3. The cost of an internally generated asset includes all of the following, except
a.
b.
c.
d.
Fees to register a legal right
Expenditure on training staff to operate an asset
Cost of materials and services used in generating the intangible asset
Compensation costs of personnel directly engaged in generating the asset
4. After initial recognition, an intangible asset shall be measured using
a.
b.
c.
d.
Cost model
Revaluation model
Cost model or revaluation model
Cost model or fair value model
5. Which statement is true concerning amortization and impairment of intangible assets?
a. Intangible assets with finite useful life are amortized over the useful life.
b. Intangible assets with finite useful life are tested for impairment at year-end when there is
an indication of impairment
c. Intangible assets with indefinite life are not amortized but tested for impairment at least
annually.
d. All statements are true.
6. When an entity successfully defended a patent from infringement by a competitor, the cost of
successful litigation should be
a.
b.
c.
d.
Amortized over the legal life of the patent
Amortized over five years
Expense in the period when incurred
Amortized over the remaining life of the patent
7. An entity should recognize goodwill at what point?
a.
b.
c.
d.
Costs have been incurred in the development of goodwill
Goodwill has been created in the purchase of a business
When the entity has exceptional customer relations
The fair value exceeds the carrying amount
8. Which accurately describes the accounting for goodwill?
a.
b.
c.
d.
Amortized over 20 years
Amortized over 10 years
Amortized over 10 years and tested for impairment annually
Not amortized but tested for impairment annually
9. Which of the following would be considered research and development?
a.
b.
c.
d.
Routing effort to refine an existing product
Periodic alteration to existing production line
Construction of preproduction prototype
Cost of marketing research
10. Which of the following cost should not be capitalized?
a.
b.
c.
d.
Acquisition cost of equipment to be used on current and future research projects
Engineering cost incurred to advance the product to the full manufacturing stage
Cost of testing prototype before economic feasibility has been demonstrated
Cost incurred to file a patent
11. Research activities include all of the following, except
a.
b.
c.
d.
Formulation and design of the possible product or process alternative
Search for product or process alternative
Laboratory research aimed at discovering new scientific knowledge
Testing of preproduction prototype
12. Which statement is true about development cost?
a.
b.
c.
d.
Must be expensed immediately
Always capitalized and amortized over useful life
May be capitalized as an intangible asset under very restrictive situations
May be recorded as a component of OCI.
END