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Intangible Assets and R&D

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and the study of accounting. Good luck!

This week's quiz brought to you by:
Professor Diane Roberts
University of San Francisco



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1 - US GAAP requires what treatment of research and development costs?
Expensing of research costs and capitalization of development costs.
Expensing of all research and development costs
Capitalization if a patent is granted within the current year.
Capitalization if the company applies for a patent during the current year.

2 - The distinction US GAAP makes between definite and indefinite life intangible assets came about from rule making related to:
abolishment of the pooling of interests method of consolidation.
standards for research and development costs.
treatment of self developed versus purchased intangibles.
depreciation method changes treated as estimate changes instead of principle changes.

3 - Expenses related to intangible assets do not include:
research and development costs for self-developed intangible assets.
legal costs related to unsuccessful defense of a patent.
amortization of patents over their economic useful lives when shorter than legal life.
legal costs related to the registration of a self-developed patent.

4 - Amortization of the intangible asset of goodwill is:
over a mandatory 40 year period.
at management’s discretion with a maximum life of 40 years.
no longer acceptable but annual impairment tests are required with write down if impaired.
no longer acceptable unless management feels amortization more appropriately reflects asset value.

5 - A patent with a 15 year remaining legal life was purchased from an inventor. Management estimates the patent will be useful for another 12 years. On the company financial statements, the patent's purchase price should be"
Capitalized and amortized over the remaining legal 15 year life.
Capitalized and amortized over the useful 12 year life.
Capitalized and no amortization expense recorded.
Expensed in total immediately.

6 - Which of the following items would not be recorded as an intangible asset?
Internally generated goodwill
Registration fees for a patent
Successful legal defense of patent
All of the above are intangible assets.

7 - Which of the following are research and development costs?
Model testing.
Prototype design and construction.
Engineering costs incurred to move design to the manufacturing stage.
All of the above.

8 - An impairment loss has been recorded and the intangible asset has been written down. Treatment for recovery of value in a later period is to:
write up the asset and record an extraordinary gain.
write up the asset and record a prior period adjustment to correct the prior year error.
do nothing as no subsequent write up is permitted for a recovery of value.
either write up the asset or not write up at management’s discretion.

9 - Goodwill may arise from the purchase of an on-going business. It is computed by comparing the purchase price to:
book value of the acquired assets less the assumed liabilities
market value of the acquired assets less the assumed liabilities.
book value of the acquired assets.
market value of the acquired assets

10 - A company acquires a franchise that gives the exclusive right to market a product for as long as the purchasing company is in business. The purchase price of franchise is:
Capitalized and amortized over a maximum 40 year life.
Capitalized and amortized over a life determined at management’s discretion.
Capitalized and no amortization expense recorded.
Expensed in total immediately.

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