INTANGIBLE ASSETS – QUIZ 1

1. The cost of purchasing patent rights for a product 9. The best definition of useful life of an intangible asset
that might otherwise have seriously competed with one is
of the purchaser’s patented products should be
 The period over which management believes
 Amortized over the remaining estimated life of the intangible asset will contribute to the
the original patent covering the product whose revenue-producing process
market would have been impaired by
10. Which of the following statements in relation to
competition from the newly patented product.
intangible assets acquired in a business combination is
2. Which of the following items would qualify as an true?
intangible asset? I: Intangible assets acquired in a business combination
shall only be recognized if they have already been
 Legal cost paid to intellectual property lawyers
recognized by the entity being acquired
to register a patent
II: Intangible assets acquired in a business combination
3. Which of the following statements in relation to shall not be recognized separately from goodwill.
intangible asset is true?
 Neither 1 nor 2
I: Intangible asset cannot be treated as having an
indefinite useful life (false) 11. Which of the following is not relevant in
II: Intangible asset with a finite useful life shall be determining the useful life of an intangible asset?
measured at cost and tested annually for impairment
 The residual value of the asset
(false)
12. Which of the statement is correct?
 Neither 1 nor 2
 Intangible assets with finite useful life should be
4. The residual value of an intangible asset should be
amortized but those with an indefinite useful
presumed to zero, unless
life should not be amortized
I: There is a commitment by a third party to purchase
the asset at the end of its useful life 13. The cost of an intangible asset includes all of the
II: There is an active market for the asset and residual following except
value can be determined by reference to that market
and it is probable that such market will exist at the end  All of these are included (purchase price, legal
of the asset’s useful life fees, other incidental expense)

 Both 1 and 2 14. The proper accounting for the costs incurred in
creating computer software product is to
5. The intangible asset goodwill may be
 Charge research and development expense
 Capitalized only when purchased when incurred until technological feasibility has
been established for the product.
6. Identifiable intangible assets include all of the
following, except 15. The major problem of accounting for purchased
goodwill is
 Goodwill
 Distinguishing it from internally generated
7. An indefinite useful life means that
goodwill
 There is no foreseeable limit to the asset’s
16. A patent is reported at
useful life
 Cost less accumulated amortization and
8. Which of the following assets does not have the
impairment
characteristics of exchangeability?

 Goodwill
17. If a company construct a laboratory building to be 26. The recognition criteria for an intangible asset
used as a research and development facility, the cost of include which of the following conditions?
the laboratory building is matched against earnings as I: It must be measured at cost
II: Its cost can be measured reliably
 Depreciation deducted as part of research and
III: It is probable that the future economic benefits will
development cost
arise from its use
18. A brand name that was acquired separately shall
 1, 2 and 3
initially be recognized at
27. An entity has recently completed a research and
 Cost
development project. Which of the following
19. Which of the following statements is incorrect statements is accurate?
regarding internal use software?
 Cost incurred during the development phase
 Internal use software is considered to be can be capitalized if criteria such as technical
software that is marketed as a separate product feasibility of the project are met.
or as part of a product or process
28. The appropriate method of amortizing intangible
20. Which of the following is not a component of the asset is best described by which of the following?
cost of internally generated intangible asset?
 The straight-line method, unless the pattern in
 Expenditure on training staff to operate the which the asset’s economic benefits are
asset consumed by the enterprise can be determined
reliably
21. Operating losses incurred during the start-up years
of a new business should be 29. Which is correct concerning the criterion of
identifiability of an intangible asset?
 Accounted for and reported like the operating I: An intangible asset is identifiable when it is separable,
losses of any other business meaning, the asset could be sold, transferred, licensed,
22. Which of the following items should not be rented or exchanged
amortized over the periods of estimated benefits? II: An intangible asset is identifiable when it arises from
contractual or legal right
 Goodwill arising from the purchase of an
existing business  Both 1 and 2

23. Which of the following costs would be capitalized as 30. Which of the following statements about intangible
part of the cost of internally generating an intangible assets is not correct?
asset, subject to satisfying recognition criteria in IAS 38?  All intangible assets must be reported on the
 Modification of the design of a product balance sheet

24. Which statement is correct regarding the proper 31. Which statement is correct concerning amortization
accounting treatment for internal-use software costs? of intangible assets?
I: Preliminary costs should be capitalized as incurred I: Intangible assets with limited or finite life are
II: Application and development costs should be amortized over their useful life
capitalized as incurred. II: Intangible assets with indefinite life are not
amortized but are tested for impairment at least
 2 only annually.
25. All costs incurred to establish the technological  Both 1 and 2
feasibility of a computer software product to be
marketed or leased should be 32. Which item below does not qualify as an intangible
asset?
 Charged to expense when incurred
 Notebook computer
33. Choose the correct statement: 40. An intangible asset shall be recognized if
I: Internally generated brands, mastheads, publishing I: It is probable that future economic benefits
titles, customer lists and items similar in substance shall attributable to the asset will flow to the entity
not be recognized as intangible assets II: The cost of the intangible asset can be measured
II: The cost of internally generated intangible asset reliably
comprises all directly attributable cost necessary to
 Both 1 and 2
create, produce and prepare the asset for its intended
use 41. M COMPANY: At what amount should the
intangible asset be initially recorded in the books of M
 Both 1 and 2
Company?
34. The factors that are considered in determining the
useful life of an intangible asset include all of the
following, except 42. CECILIA COMPANY: What is the carrying amount of
the patent on December 31, 2024?
 Residual value

35. The cost of an internally generated asset includes all

of the following. Except 43. CHRISTINE COMPANY: What amount should be
recognized as impairment loss on trademark for 2024?
 Expenditure on training staff to operate the
asset

36. HAZE COMPANY: What percentage of the original 44. P COMPANY: In its December 31, 2021 statement of
capitalized cost should be reported as the net amount financial position, what amount should P Company
on the December 31, 2025 balance sheet? report as goodwill?
 70%

37. What is required with respect to accounting for 45. SERVICE COMPANY: What amount of impairment
goodwill? loss on customer lists should Service Company
recognize?
 Goodwill should be recorded and periodically
evaluated for impairment

38.Research is 46. TAN PURCHASED PONG COMPANY: In its December

I: Original and planned investigation undertaken with 31, 2025 statement of financial position, what amount
the prospect of gaining new scientific or technical should Tan report as goodwill?
knowledge and understanding.
II: Application of research finding or other knowledge to
a plan or design for the production of new or 47. JERICHO COMPANY: What amount should be
substantially improved material, device, product, reported for the patent net of accumulated
process, system or service, prior to the commencement amortization on December 31, 2024?
of commercial production or use.

 1 only
48. MINI CORP.: When Mini Corp. acquired the patent,
39. An entity reported goodwill in last year’s statement its shares were selling for P9 a share. Mini Corp. should
of financial position. How should the entity account for record the patent at what amount?
the reported goodwill in the current year?

 Determine whether the fair value of the

reporting unit is less than the carrying amount 49. ROSALIE COMPANY: In the statement of financial
and report an impairment loss on goodwill in position at December 31, 2027, what amount should be
the income statement reported as intangible assets?
50. NG COMPANY: The total amount capitalized for this
patent through July 31. 2025 should be

51. MARIBETH COMPANY: What total amount of costs

should be expensed when incurred?

52. HAN CORPORATION: Total amount resulting from

the foregoing transactions that should be expensed
when incurred

53. HAN CORPORATION: Cost of trademark

54. AIM COMPANY: What are the carrying amounts of

intangible assets on January 1, 2021?

55. ICEBERG COMPANY: What is the patent

amortization for 2021?

56. CAN COMPANY: In the December 31, 2025

statement of financial position, the carrying amount of
this leasehold improvements should be

57. SAN COMPANY: What is the amount of goodwill?

58. MAMBUSAO COMPANY: In Mambusao’s December

31, 2025 balance sheet, what amount should be
reported as trademark?

59. EAST COMPANY: If the goodwill is determined by

capitalizing average net earnings at 10%, what is the
amount to be paid for goodwill?