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Exam 2 Study Guide Ch 12-13-14 - Exam 2 Study Guide 14...

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Exam 2 Study Guide – Chapters 12, 13 & 14 Chapter 12 21. Which of the following does not describe intangible assets? a. They lack physical existence. b. They are financial instruments. c. They provide long-term benefits. d. They are classified as long-term assets. 22. Which of the following characteristics do intangible assets possess? a. Physical existence. b. Claim to a specific amount of cash in the future. c. Long-lived. d. Held for resale. 25. Which of the following costs incurred internally to create an intangible asset is generally expensed? a. Research and development costs. b. Filing costs. c. Legal costs. d. All of the above. 30. Companies should test indefinite life intangible assets at least annually for: a. recoverability. b. amortization. c. impairment. d. estimated useful life. 34. Broadway Corporation was granted a patent on a product on January 1, 1998. To protect its patent, the corporation purchased on January 1, 2009 a patent on a competing product which was originally issued on January 10, 2005. Because of its unique plant, Broadway Corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be a. amortized over a maximum period of 20 years. b. amortized over a maximum period of 16 years. c. amortized over a maximum period of 9 years. d. expensed in 2009. 44. The reason goodwill is sometimes referred to as a master valuation account is because a. it represents the purchase price of a business that is about to be sold. b. it is the difference between the fair market value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business. c. the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation. d. it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value. 47. The intangible asset goodwill may be a. capitalized only when purchased. b. capitalized either when purchased or created internally.
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c. capitalized only when created internally. d. written off directly to retained earnings. Multiple Choice Answers— Conceptual – Chapter 12 Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 21. b 22. c 30. c 47. a 25. a 34. c 44. b 76. Lynne Corporation acquired a patent on May 1, 2010. Lynne paid cash of $30,000 to the seller. Legal fees of $1,000 were paid related to the acquisition. What amount should be debited to the patent account?
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