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Quiz 4 Intangible Assets Questions

The document contains 10 multiple choice questions regarding accounting for intangible assets. The questions cover a range of topics including research and development costs, measurement of intangible assets, amortization of intangible assets with finite lives, and accounting for business combinations involving intangible assets.

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Jessica Marie Migraso
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290 views3 pages

Quiz 4 Intangible Assets Questions

The document contains 10 multiple choice questions regarding accounting for intangible assets. The questions cover a range of topics including research and development costs, measurement of intangible assets, amortization of intangible assets with finite lives, and accounting for business combinations involving intangible assets.

Uploaded by

Jessica Marie Migraso
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Intangible Assets Questionnaire

1. Sponge Co. incurred research and development costs in 20x1 as follows:


 Equipment acquired for use in various research and development projects 975,000
 Depreciation on the above equipment 135,000
 Materials used 200,000
 Compensation costs of personnel 500,000
 Outside consulting fees 150,000
 Indirect costs appropriately allocated 250,000

The total research and development costs charge in Sponge's 20x1 statement of profit or loss should
be:
a. 850,000
b. 1,085,000
c. 1,235,000
d. 1,825,000

2. Sanitarium Co. has the following assets, stated at cost, as of December 31, 20x1:
Macintosh laptops 600,000
EPSON printers 10,000
FUJI XEROX photocopying machines 250,000
Windows Operating Software 25,000

All of the listed assets above have an original estimated useful life of 5 years and that their
remaining useful life on December 31, 20x1 is 4 years. Sanitarium uses the straight line method for
its items of property, plant and equipment and intangible assets with finite useful life. How much
would be shown as property, plant and equipment in Sanitarium’s December 31, 20x1 statement of
financial position?
a. 880,000
b. 688,000
c. 708,000
d. 2,816,000

3. On January 1, 20x1, Devjo Co. bought a franchise from McDo Co. The franchise requires an
initial fee of ₱15,000,000 payable as follows: ₱5,000,000 down payment on contract date and the
balance in five equal annual installments starting one year from contract date plus 4% interest on
the outstanding principal balance. The current market rate as of contract date is 12%. How much
is the initial measurement of the intangible asset?
a. 14,887,922
b. 15,234,090
c. 13,765,340
d. 13,139,702
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4. Joshua Bank (a NON-VAT registered entity) purchased an intangible asset from Tristan Co. for
$590,000 when the exchange rate was ₱1: $.0204. A 5% discount was available on the purchase.
Non-transferrable taxes paid amounted to 20% of the invoice price, net of the discount. A 12%
VAT was also paid based on the amount that is gross of the non-transferrable taxes. Installation
and testing costs amounted to ₱40,000. How much will be recorded as intangible asset?
a. 36,976,059
b. 33,010,598
c. 33,050,589
d. 36,967,059

5. Chair Leader Co. purchased a patent on January 1, 20x3 for ₱120,000. The patent had a
remaining useful life of 10 years at that date. In January of 20x4, Chair incurred ₱54,000 in
acquiring another patent that clearly extended the existing patent’s life to 12/31/15. What amount
of amortization expense would Chair record in 20x4?
a. 12,000
b. 13,500
c. 14,500
d. 18,000

6. During 20x1, King Co. incurred the following costs:


 Testing in search for process alternatives 720,000
 Costs of testing prototype and design modifications 500,000
 Modification of the formulation of a process 1,220,000
 Research and development services performed by Queen Corp. for King 650,000

In King's 20x1 statement of profit or loss, research and development expense should be
a. 1,220,000.
b. 1,870,000.
c. 2,590,000.
d. 3,090,000.

7. In 20x4, Edwards Corporation incurred research and development costs as follows:


Materials and equipment 150,000
Personnel 180,000
Indirect costs 225,000
555,000

These costs relate to a product that will be marketed in 20x5. It is estimated that these costs will
be recouped by December 31, 20x7. The equipment has no alternative future use. What is the
amount of research and development costs that should be expensed in 20x4?
a. 0.
b. 330,000.
c. 405,000.
d. 555,000.
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8. Tyson Co. incurred the following costs during 20x1:


 Modification to the formulation of a chemical product 360,000
 Trouble-shooting in connection with breakdowns during commercial
production 450,000
 Costs of testing prototype and design modifications 600,000
 Seasonal or other periodic design changes to existing products 555,000
 Laboratory research aimed at discovery of new technology 675,000

In its statement of profit or loss for the year ended December 31, 20x1, Tyson should report
research and development expense of
a. 1,635,000.
b. 2,085,000.
c. 1,275,000.
d. 1,035,000.

9. On June 30, 20x4, Dax, Inc. exchanged 6,000 shares of Trane Corp. ₱30 par value ordinary shares
for a patent owned by Gore Co. The Trane stock was acquired in 20x4 at a cost of ₱160,000. At
the exchange date, Trane ordinary shares had a fair value of ₱45 per share, and the patent had a
carrying amount of ₱320,000 in Gore's books. Dax should record the patent at
a. 160,000.
b. 180,000.
c. 270,000.
d. 320,000.

10. Ely Co. bought a patent from Backo Corp. on January 1, 20x4, for ₱180,000. An independent
consultant retained by Ely estimated that the remaining useful life is 30 years. Its unamortized
cost on Backo's accounting records was ₱90,000; the patent had been amortized for 5 years by
Backo. How much should be amortized for the year ended December 31, 20x4?
a. 0.
b. 3,000.
c. 6,000.
d. 12,000.

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