INTANGIBLE ASSETS 5.

Which of the following statements is true

(PAS 38) concerning separate acquisition of an
1. An intangible asset is defined as intangible asset?
a. An identifiable asset without physical a. If an intangible asset is acquired
substance. separately, the cost of the intangible
b. A nonmonetary asset without physical asset can usually be measured reliably.
substance. b. If payment for an intangible asset is
c. An identifiable nonmonetary asset deferred beyond normal credit terms,
without physical substance. the cost is equal to the cash price
d. An identifiable monetary and equivalent.
nonmonetary asset without physical c. The cost of a separately acquired
substance. intangible asset comprises the
purchase price and any directly
2. An intangible asset is identifiable when attributable cost of preparing the asset
a. It is separable. for the intended use.
b. It arises from contractual and other d. All of these statements are true.
legal right.
c. It is either separable or it arises from 6. Which of the following statements is
contractual and other legal right. incorrect concerning acquisition of an
d. It is neither separable nor it arises from intangible asset as part of a business
contractual and other legal right. combination?
a. The cost of the intangible asset is
3. Which of the following statements is true based on the fair value at the date of
in relation to control by the entity of the acquisition.
intangible asset? b. If there is an active market for the
a. The capacity of the entity to control the intangible asset, the fair value is equal
economic benefits from an intangible to the quoted price of an identical
asset would normally stem from legal asset.
rights that are enforceable in a court of c. If there is an active market for the
law. intangible asset, the fair value may
b. The skill of employees arising out of the also be equal to the quoted price of a
benefits of training costs cannot be similar asset.
recognized as intangible asset. d. The fair value of an identifiable
c. Market share and customer loyalty intangible asset acquired in a business
cannot normally be recognized as combination cannot be measured with
intangible asset because an entity sufficient reliability separately from
cannot control the action of customers. goodwill.
d. All of these statements are true.
7. Which of the following statements is true
4. An intangible asset shall be recognized if in relation to internally generated intangible
a. It is probable that future economic asset?
benefits attributable to the asset will a. Internally generated brand, masthead,
flow to the entity. publishing title, and customer list shall
b. The cost of the intangible asset can be not be recognized as an intangible
measured reliably. asset.
c. It is possible that future economic b. The cost of internally generated
benefits attributable to the asset will intangible asset comprises all directly
flow to the entity and the cost of the attributable costs necessary to create,
intangible asset can be measured produce and prepare the asset for the
reliably. intended use.
d. It is probable that future economic c. Internally generated goodwill shall not
benefits attributable to the asset will be recognized as an intangible asset.
flow to the entity and the cost of the d. All of these statements are true.
intangible asset can be measured
reliably.
8. The cost of an internally generated 3. The factors that need to be considered in
intangible asset includes all of the following, determining the useful life of an intangible
except asset include all of the following, except
a. Expenditure on materials used in a. Technical obsolescence
generating the intangible asset. b. Expected action of competitors
b. Compensation costs of personnel c. Expected usage of the asset by the
directly engaged in generating the entity
asset. d. Residual value
c. Fees to register a legal right.
d. Expenditure on training staff to 4. An intangible asset is regarded as having
operate the asset. an indefinite useful life when
a. There is no foreseeable limit to the
9. All of the following expenditures are period over which the asset is expected
expensed when incurred, except to generate net cash inflows to the
a. Start up costs entity.
b. Advertising and promotion costs b. There is a foreseeable limit to the
c. Business relocation or reorganization period over which the asset is expected
costs to generate net cash inflows to the
d. Payment in advance of delivery of entity.
goods or the rendering of services c. The useful life of the intangible asset
arises from contractual right.
10. Which of the following statements is true d. The useful life of the intangible asset
concerning amortization and impairment of arises from legal right.
intangible assets?
a. Intangible assets with finite useful life 5. The residual value of an intangible asset
are amortized over the useful life. with a finite useful life shall be assumed
b. Intangible assets with finite useful life zero, except
are tested for impairment at the end of a. When there is a commitment by a third
reporting period when there is an party to purchase the asset at the end
indication of impairment. of the useful life.
c. Intangible assets with indefinite useful b. When there is an active market for the
life are not amortized but are tested for asset and it is probable that such
impairment at least annually. market will exist at the end of the
d. All of these statements are true. useful life.
c. When there is a commitment by a third
1. It is the systematic allocation of the party to purchase the asset at the end
amortizable amount of an intangible asset of useful life or there is an active
over the useful life. market for the asset and it is probable
a. Amortization that such market will exist at the end of
b. Allocation useful life.
c. Realization d. There are no exceptions.
d. Expiration
6. An intangible asset acquired by way of
2. The amortization method used shall reflect government grant may be initially recorded
the pattern in which the asset's economic at
benefits are consumed by the entity. If such a. Fair value
pattern cannot be determined reliably, what b. Nominal amount or zero plus any
is the amortization method used? directly attributable expenditure
a. Straight line c. Either fair value or nominal amount or
b. Production method zero plus directly attributable
c. Diminishing balance method expenditure
d. Ratio of current year's sales to the total d. Neither fair value nor nominal amount
expected sales
7. The cost of a separately acquired
intangible asset comprises the purchase
price, including import duties and c. Operating loss during the initial stage
nonrefundable purchase taxes, and of the project.
a. Cost of introducing a new product or d. Legal cost paid to intellectual property
service lawyer to register a patent.
b. Cost of conducting a business in a new
location 3. Once recognized, an intangible asset can
c. Administration and other general be carried at
overhead cost a. Cost less accumulated amortization
d. Directly attributable cost of preparing b. Cost less accumulated amortization
the asset for the intended use. and impairment losses
c. Revalued amount less accumulated
8. Directly attributable costs of preparing the amortization
intangible asset for the intended use include d. Cost plus a notional increase in fair
all, except value since the intangible asset is
a. Cost of employee benefits arising acquired
directly from bringing the asset to
working condition 4. Which disclosure is not required with
b. Professional fee arising directly from respect to an intangible asset?
bringing the asset to working condition a. Useful life of the intangible asset
c. Cost of testing whether the asset is b. Reconciliation of carrying amount at
functioning properly the beginning and end of the year
d. Initial operating loss c. Contractual commitment for the
acquisition of intangible asset
9. After initial recognition, an intangible asset d. Fair value of similar intangible asset
shall be measured using the used by competitor
a. Cost model
b. Revaluation model 5. A consideration in determining the useful
c. Either cost model or revaluation model life of an intangible asset is not the
d. Neither cost model nor revaluation a. Legal, regulatory or contractual
provision
10. Which of the following represents the b. Provision for renewal or extension
maximum amortization period mandated for c. Initial cost
an intangible asset with finite useful life? d. Obsolescence
a. 10 years
b. 20 years 6. Amortization of an intangible asset with a
c. 40 years finite useful life shall commence when
d. No arbitrary cap on the useful life has a. It is first recognized as an asset.
been established. b. It is probable that it will generate future
economic benefit.
(IFRS) c. It is available for use.
1. Which item does not qualify as an d. The cost can be identified with
intangible asset? reasonable certainty.
a. Computer software
b. Registered patent 7. A brand name that was acquired
c. Copyright that is protected separately shall initially be recognized at
d. Notebook computer a. Recoverable amount
b. Either cost or fair value at the choice of
2. Which of the following would qualify as an the acquirer
intangible asset? c. Fair value
a. Advertising and promotion on the d. Cost
launch of a huge product.
b. College tuition fees paid to employees 8. The recognition criteria for an intangible
who decide to enroll in an executive asset include which of the following
M.B.A program at Harvard University conditions?
while working with the entity. a. The intangible asset must be measured
at cost.
 b. The cost can be measured reliably.
c. It is probable that future economic 3. Which of the following is a criterion that
benefit will arise from use. must be met in order for an intangible asset
d. It is probable that future economic to be recognized other than goodwill?
benefit will arise from use and the cost a. The fair value can be measured reliably.
can be measured reliably. b. The asset is part of the activities aimed
at gaining new scientific or technical
9. Which of the following statements in knowledge.
relation to intangible assets is true? c. The asset is expected to be used in the
a. Intangible assets cannot be treated as production or supply of goods or
having an indefinite useful life. services.
b. Intangible assets with a finite useful life d. The asset is identifiable and lacks
shall be measured initially at cost and physical substance.
tested annually for impairment.
c. Intangible assets acquired in a business 4. Intangible assets with indefinite useful life
combination shall only be recognized if are tested for impairment
the assets have already been a. Quarterly at the quarterly reporting
recognized by the acquiree. date
d. Intangible assets acquired in a business b. Annually at the annual reporting date
combination shall be recognized c. Biannually at the reporting date
separately from goodwill. d. There is no guideline defining when
intangible assets are tested for
10. What is the appropriate method of impairment
amortizing intangible asset?
a. The straight line method, unless the 5. Operating losses incurred during the start-
pattern in which the economic benefits up years of a new entity should be
are consumed can be determined a. Accounted for and reported like any
reliably. other operating losses
b. The double declining balance in all b. Written off directly against retained
circumstances. earnings.
c. A subjective amount of periodic c. Capitalized as a deferred charge and
amortization without regard to any amortized over five years.
particular method. d. Capitalized as an intangible asset and
d. The straight line method in all amortized over twenty years.
circumstances.
(IAA)
1. Intangible assets are reported in the 1. Which of the following does not describe
statement of financial position an intangible asset?
a. With an accumulated amortization a. The asset lacks physical existence.
account b. The asset is monetary.
b. Under property, plant and equipment c. The asset provides long-term benefit.
c. As a separate line item d. The asset is classified as noncurrent
d. All of these are allowed in presenting asset.
intangible assets
2. Which of the following is a characteristic of
2. An entity that acquires an intangible asset an intangible asset?
may use the revaluation model for a. Physical existence
subsequent measurement only if b. Claim to a specific amount of cash in
a. The useful life of the intangible asset, the future
can be reliably determined. c. Long-lived
b. An active market exists for the d. Held for sale
intangible asset.
c. The cost of the intangible asset can be 3. Costs incurred internally to create
measured reliably. intangible asset are
d. The intangible asset is a monetary a. Capitalized
asset. b. Capitalized if useful life is indefinite
 c. Expensed when incurred
d. Expensed if useful life is limited 1. Patent and trade secret are an example of
which general category of intangible asset?
4. Which of the following methods of a. Market-related
amortization is normally used for an b. Customer-related
intangible asset? c. Artistic-related
a. Sum of the years' digits d. Technology-based
b. Straight line
c. Units of production 2. A patent should be amortized over
d. Double declining balance a. Twenty years
b. The useful life
5. Under current accounting practice, c. The useful life or twenty years,
intangible assets are classified as whichever is longer
a. Amortizable and unamortizable d. The useful life or twenty years,
b. Limited life and indefinite life whichever is shorter
c. Specifically identifiable and goodwill
type 3. When a patent is amortized, the credit is
d. Legally restricted and goodwill type usually made to
a. The patent account
6. Which type of intangible asset is b. An accumulated amortization account
amortized? c. An accumulated depreciation account
a. Limited life d. An expense account
b. Indefinite life
c. Both limited life and indefinite life 4. When an entity successfully defended a
d. Neither limited life nor indefinite life patent from infringement by a competitor,
the cost of successful litigation should be
7. Entities should evaluate indefinite life charged to
intangible assets at least annually for a. Patent and amortized over the legal life
a. Recoverability of the patent.
b. Amortization b. Legal fees and amortized over five
c. Impairment years.
d. Estimated useful life c. Expense of the period.
d. Patent and amortized over the
8. The major problem of accounting for an remaining useful life of the patent.
intangible asset is determining
a. Fair value 5. The cost of purchasing right for a product
b. Separability that might otherwise have seriously
c. Residual value competed with the purchaser's patented
d. Useful life product should be
a. Charged off in the current period.
9. The factors considered in determining the b. Amortized over the legal life of the
useful life of an intangible asset include all of purchased patent.
the following, except c. Added to factory overhead and
a. The expected use of the asset. allocated to production of the
b. Any legal or contractual provision that purchaser's product.
may limit the useful life. d. Amortized over the remaining useful
c. Any provision for renewal or extension life of the patent for the product whose
of legal life of the asset. market would have been impaired by
d. The amortization method used. competition from the newly patented
product.
10. Which of the following is not an
intangible asset? (AICPA Adapted)
a. Trade name 1. Goodwill shall be recognized only when
b. Research and development cost a. If is purchased from another entity.
c. Franchise
d. Copyright
 b. It can be established that a definite a. Be written off as soon as possible
benefit has resulted from good name, against retained earnings.
capable staff or reputation. b. Be written off as soon as possible as
c. It is acquired through the purchase of other expense.
another entity. c. Be written off by systematic charge as
d. An entity reports above normal operating expense over the period
earnings for five years. benefited.
d. Not be amortized.
2. What does the standard require with
respect to accounting for goodwill? 2. The intangible asset goodwill may be
a. Goodwill should be amortized over a a. Capitalized only when purchased.
five-year period. b. Capitalized either when purchased or
b. Goodwill should be amortized over the created internally.
useful life. c. Capitalized only when created
c. Goodwill should be recorded and never internally.
adjusted. d. Written off directly against retained
d. Goodwill should be recorded and earnings.
periodically evaluated for impairment.
3. In a business combination, the excess of
3. Goodwill should be tested periodically for cost of purchase over the fair value of the
impairment identifiable net assets acquired is
a. For the entity as a whole. a. other asset
b. At the subsidiary level. b. Indirect cost
c. At the industry segment level. c. Goodwill
d. At the operating segment level or one d. A bargain purchase
level below.
4. Goodwill shall be tested for impairment
4. An entity is performing an annual test of a. If there is an indication of impairment
the impairment of goodwill for a cash b. Annually
generating unit. It has determined that the c. Every 5 years
fair value of the unit exceeds the carrying d. On the acquisition of a subsidiary
amount. Which of the following statements is
true concerning the test of impairment? 5. Which of the following intangible assets
a. Impairment is not indicated and no should be reported as a separate line item in
additional analysis is necessary. the statement of financial position?
b. Goodwill should be written down as a. Goodwill
impaired. b. Franchise
c. The assets and liabilities should be c. Patent
valued to determine if there has been d. Trademark
an impairment of goodwill.
d. Goodwill should be retested at the 1. A trademark is an example of which
entity level. general category of intangible asset?
a. Market-related
5. An impairment loss recognized for b. Customer-related
goodwill c. Artistic-related
a. Shall not be reversed in a subsequent d. Contract-based
year.
b. May be reversed fully in a subsequent 2. When an entity develops a trademark, the
year. costs directly related to securing it should
c. May be reversed partly in a subsequent generally be capitalized. Which of the
year. following costs associated with a trademark
d. Shall be reversed in a subsequent year. should not be capitalized?
a. Attorney fees
(IAA) b. Consulting fees
1. Purchased goodwill should c. Research and development fees
d. Design costs
 c. Artistic-related
3. Which of the following should not be d. Contract-based
capitalized as cost of trademark?
a. Cost of successful litigation of the 4. Copyright should be amortized over
trademark a. The legal life
b. Registration with Intellectual Property b. The life of the creator plus fifty years
Office c. Twenty years
c. Design cost d. The useful life or legal life, whichever is
d. Legal fee shorter

4. What is the legal life of trademark? 5. Which of the following intangible assets
a. 10 years should not be amortized?
b. 20 years a. Copyright
c. 10 years and renewable after every 10 b. Customer list
years. c. Perpetual franchise
d. 20 years and renewable after every 20 d. All of the intangible assets should be
years. amortized.

5. Which of the following statements is 6. Which of the following should be expensed

incorrect in relation to trademark? as incurred by the franchisee for a franchise
a. A trademark can be regarded as an with finite useful life?
intangible asset with an indefinite a. Amount paid to the franchisor for the
useful life considering the almost franchise.
automatic renewal of the legal life. b. Payment to an entity, other than the
b. A trademark is an identifiable franchisor, for that entity’s franchise.
intangible asset. c. Legal fees paid to the franchisee’s
c. A trademark is not amortized but lawyers to obtain the franchise.
tested for impairment at least annually d. Periodic payments to the franchisor
and whenever there is an indication of based on the franchisee’s revenue.
impairment.
d. A trademark is amortized and tested 7. An airline entity purchased airline gate
for impairment whenever there is an rights at an international airport with a legal
indication of impairment at the end of life of five years. However, the entity has the
reporting period. ability and right to extend the rights every
ten years for an indefinite period of time.
1. A copyright is an example of which Over what period of time should the entity
general category of intangible asset? amortize the gate rights?
a. Market-related a. 5 years
b. Customer-related b. 15 years
c. Artistic-related c. 40 years
d. Contract-based d. The rights should not be amortized.

8. A lessee incurred cost to construct

2. Franchise and broadcast right are an walkway and landscaping to improve leased
example of which general category of property. The useful life of the walkway and
intangible asset? landscaping cost is fifteen years. The
a. Market-related remaining term of the nonrenewable lease is
b. Customer-related twenty years. The walkway and landscaping
c. Artistic-related cost should be
d. Contract-based a. Capitalized as leasehold improvement
and depreciated over twenty years.
3. Customer list and order backlog are an b. Capitalized as leasehold improvement
example of which general category of and depreciated over fifteen years.
intangible asset? c. Capitalized as leasehold improvement
a. Market-related and expensed in the year in which the
b. Customer-related lease expires.
 d. Expensed as incurred. II. The grantor has contractually
guaranteed to pay the operator the
9. Start-up costs including legal and state specified or determinable amount.
fees to organize a new entity should be a. I only
a. Capitalized and never amortized. b. II only
b. Capitalized and amortized over a c. Both I and II
reasonable period. d. Neither I nor II
c. Capitalized and tested for impairment
annually. 5. If the infrastructure asset is recognized by
d. Expensed as incurred. the concession operator as a financial asset,
it is accounted for as
(IFRIC 12) a. Loan receivable
1. It is an arrangement whereby a public b. Financial asset at fair value through
sector entity grants a private concession other comprehensive income
operator to provide services that give the c. Financial asset at fair value through
public access to major economic and social profit or loss
infrastructure, such as expressway and d. All of these
telecommunication network.
a. Service concession (IFRS)
b. Loan 1. Which of the following statements in
c. Government grant relation to research and development is
d. Government assistance true?
I. Expenditure during the
2. The private concession operator shall research phase of a project
recognize the infrastructure asset as may sometimes be
a. Intangible asset capitalized as an intangible
b. Financial asset asset.
c. Either intangible asset or financial II. Expenditure during the
asset development phase of a
d. Neither intangible asset nor financial project may sometimes be
asset capitalized as an intangible
asset.
3. The infrastructure asset shall be a. I only
recognized by the concession operator as an b. II only
**intangible asset** when c. Both I and II
I. The operator has received a right, d. Neither I nor II
not a license, to charge users for
the public service. 2. Which of the following statements in
II. The right to charge the users for the relation to "development" is true?
public service is not an I. The products being developed
unconditional right because the should have already been put into
revenue receivable is not agreed commercial production or use.
upon in advance but is dependent II. Development involves the
on the use of the asset. application of research findings.
a. I only a. I only
b. II only b. II only
c. Both I and II c. Both I and II
d. Neither I nor II d. Neither I nor II

4. The infrastructure asset shall be 3. A dot-com entity has recently completed a

recognized by the concession operator as a highly publicized research and development
financial asset when project. Which of the following statements in
I. The operator has an unconditional relation to the research and development
contractual right to receive cash project is true?
over the life of the arrangement. a. Costs incurred during the research
phase can be capitalized.
 b. Costs incurred during the development 3. Which of the following statements is
phase can be capitalized if criteria such incorrect regarding internal-use software?
as technical feasibility of the project a. The application and development costs
being established are met. of internal-use software should be
c. Training costs of technicians used in amortized on the straight line basis
research can be capitalized. unless another systematic and rational
d. Designing of jigs and tools would basis is more appropriate.
qualify as research activities. b. Internal-use software is considered to
be software that is marketed as a
4. Which principle best describes the current separate product or as part of a
method of accounting for research and product or process.
development cost? c. The costs of testing and installing
a. Associating cause and effect computer hardware should be
b. Systematic and rational allocation capitalized as incurred.
c. Income tax minimization d. The costs of training and application
d. Immediate recognition as an expense maintenance should expensed as
incurred.
5. Web site development costs incurred for
the purpose of promoting and advertising an 4. A computer software purchased as an
entity's product or service should be operating system for the hardware or as an
a. Expensed as incurred. integral part of a computer controlled
b. Recognized as an intangible asset with machine tool that cannot operate without the
a definite life. specific software shall be treated as
c. Recognized as an intangible asset with a. Intangible asset
indefinite life. b. Property, plant and equipment
d. Included as component of other c. Inventory
comprehensive income. d. Expense

(AICPA Adapted) 5. At the beginning of the current year, an

1. The proper accounting for costs incurred in entity had capitalized cost for a new
creating computer software is computer software product with an economic
a. To capitalize all costs until the software life of four years. Sales for the current year
is sold. were ten percent of expected total sales of
b. To charge research and development the software. The pattern of future sales
expense when incurred until cannot be measured reliably. At year-end, the
technological feasibility has been software had a net realizable value equal to
established for the product. eighty percent of the capitalized cost. The
c. To charge research and development unamortized cost reported in the year-end
expense only if the computer software statement of financial position should be
has alternative future use. a. Net realizable value
d. To capitalize all costs as incurred until a b. Ninety percent of net realizable value
detailed program design or working c. Seventy five percent of capitalized cost
model is created. d. Ninety percent of capitalized cost

2. Which of the following statements is true (AICPA Adapted)

regarding the proper accounting treatment 1. Which of the following research and
for internal-use software costs? development costs should be capitalized and
I. Preliminary costs should be amortized over current and future periods?
capitalized as incurred. a. Research and development general
II. Application and development costs laboratory building
should be capitalized as incurred. b. Inventory used for a specific research
a. I only project
b. II only c. Administrative salaries allocated to
c. Both I and II research and development
d. Neither I nor II
 d. Research findings purchased from d. Must be expensed in the period
another entity to aid a particular incurred unless it can be clearly
research project currently in process demonstrated that the expenditure will
have alternative future use or unless
2. If an entity constructs a laboratory contractually reimbursable.
building to be used as a research and
development facility, the cost of the 2. Which of the following would be
laboratory building is matched against considered research and development?
earnings as a. Routine effort to refine an existing
a. Research and development expense in product
the period of construction. b. Periodic alteration to existing
b. Depreciation deducted as part of production line
research and development expense. c. Marketing research to promote a new
c. Depreciation or immediate writeoff product
depending on entity policy. d. Construction of prototype
d. An expense at such time as productive
research has been obtained from the 3. Which of the following costs should not be
facility. capitalized?
a. Acquisition cost of equipment to be
used on current and future research
4. A research and development activity for projects.
which the cost would be expensed as b. Engineering cost incurred to advance
incurred is the project to the full production stage.
a. Design, construction and testing of c. Cost incurred to file for patent.
preproduction prototype or model d. Cost of testing prototype before
b. Quality control during commercial economic feasibility has been
production demonstrated.
c. Periodic design changes to existing
products 4. Which of the following costs should be
d. Adaptation of an existing capability to a excluded from research and development
particular requirement or customer expense?
need a. Modification of the design of a product.
b. Acquisition of research and
5. Which is not considered a research and development equipment for use on a
development activity? current project only.
a. Routine on-going effort to refine, enrich c. Cost of marketing research for a new
or improve quality of existing product product.
b. Laboratory research aimed at discovery d. Engineering activity required to
of new knowledge advance the design of a product to the
c. Conceptual formulation and design of manufacturing stage.
possible product or process
d. Design, construction and operation of a 5. Which of the following would not be
pilot plant considered research and development
activity?
(IAA) a. Adaptation of an existing capability to a
particular requirement or customer
1. How should research and development need.
cost be accounted for? b. Application of research finding or other
a. Must be capitalized when incurred and knowledge to a plan for a new product.
then amortized over useful life. c. Laboratory research aimed at discovery
b. Must be expensed in the period of new knowledge.
incurred. d. Conceptual formulation and design of
c. May be either capitalized or expensed possible product alternative.
when incurred depending upon the
materiality. 6. Research activities include all of the
following, except
 a. Search for application of research d. Development cost is recorded as
finding or other knowledge. component of other comprehensive
b. Search for product or process income.
alternative.
c. Formulation and design of the possible
product or process alternative.
d. Design, construction and testing of All of the following are essential
preproduction prototype and model. characteristics of an intangible asset, except
a. identifiability.
7. Development activities include all of the b. controlled by the enterprise.
following, except c. expected future economic benefits.
a. Design of tools, jigs, molds and dies d. indefinite useful life.
involving new technology.
b. Design, construction and operation of a Which of the following assets does not have
pilot plant that is not of a scale the characteristic of exchangeability?
economically feasible for commercial a. Patents
production. b. Goodwill
c. Design, construction and testing of a c. Copyrights
chosen alternative for a new or d. Franchise
improved product or process.
d. Laboratory activities aimed at obtaining Which of the following research and
new knowledge. development related costs should be
capitalized and amortized over current and
8. Which of the following is not a criterion future periods?
which must be met before development cost a. Labor and material costs incurred in
can be capitalized? building a prototype model, after
a. The entity has sufficient financial establishing technological feasibility
resources to complete the project. b. Cost of testing equipment that will
b. The entity intends to complete the also be used solely in the current year
project and either use or sell the research and development project
intangible asset. c. Administrative salaries allocated to
c. The entity can reliably identify the research and development
research cost incurred to bring the d. Research findings purchased from
project to economic feasibility. another company to add a particular
d. The project has achieved technical research project currently in process
feasibility.
An intangible asset shall be recognized if it is
9. Which of the following costs should be probable that the expected future economic
capitalized? benefits that are attributable to the asset will
a. Acquisition cost of equipment to be flow to the enterprise and the cost of the
used on current research project only asset
b. Engineering cost incurred to advance a. can be reliably estimated.
the product to the full production stage b. can be reliably measured.
c. Cost of research to determine whether c. can be controlled by the enterprise.
a market for the product exists d. is inseparable from the enterprise.
d. Salaries of research staff
With regard to impaired goodwill, the IFRS
10. Which of the following statements is true provides for recognition of impairment loss;
about accounting for development cost? impairment recovery
a. Development cost must be expensed a. yes yes
b. Development cost is always deferred b. yes no
and expensed against future revenue c. no yes
c. Development cost may be capitalized d. no no
as an intangible asset in very
restrictive situations.
Which of the following items is a component b. is easily computed by assigning a
of the cost of an internally generated value to the individual attributes that
intangible asset? comprise its existence.
a. Selling, administrative and other c. represents a unique asset and is
general overhead expenditures that recognized only when resulting from
cannot be directly attributed to the purchase of an existing entity.
preparing the asset for use d. exists in any company that has
b. Identified inefficiencies and initial earnings that differ from those of a
operating losses competitor.
c. Expenditure on training staff to
operate the asset A consideration not relevant in determining
d. Fees to register a legal right the useful life of an intangible asset is the
a. the period of control over the asset
After initial recognition, a class of intangible and legal or similar limits on the use of
assets, whose fair value can be reliably the asset.
measured, may be carried in the financial b. technical, technological, commercial
statement or other types of obsolescence.
a. at revalued amount, being the fair c. expected actions of competitors or
value at the date of the revaluation potential competitors
plus any subsequent accumulated d. initial cost.
amortization and any subsequent
accumulated impairment losses. Intangible assets are non-financial assets
b. at revalued amount, being the fair without physical substance; hence, one of
value at the date of the revaluation the items listed below is not such an asset.
less any subsequent accumulated a. Patent
amortization and any subsequent b. Leasehold
accumulated impairment losses. c. Franchise
c. at revalued amount, without any d. Available-for-sale securities
subsequent amortization.
d. at cost. When the enterprise is unable to determine
reliably the pattern of economic benefits
Legal fees incurred in successfully defending derived from an intangible asset, the
a patent suit should be capitalized when the amortization method that the enterprise
patent has been internally developed ? shall use is the
purchased from an inventor? a. sum-of-the-years’-digits method.
a. yes no b. straight line method.
b. yes yes c. composite rate method.
c. no yes d. double-declining balance method.
d. no no
The cost of purchasing patent rights for a
Legal fees incurred by a company in product that might otherwise have seriously
defending its patent rights should be competed with one of the purchaser’s
expensed when the outcome of litigation is patented products should be
successful , unsuccessful a. charged to expense in the period of
a. yes no purchase.
b. yes yes b. amortized over the legal life of the
c. no yes purchased patent.
d. no no c. added to factory overhead and
allocated to production of the
Goodwill purchaser’s product.
a. generated internally, should not be d. amortized over the remaining
capitalized unless it is measured by an estimated life of the original patent
individual independent of the covering the product whose market
enterprise involved. would have been impaired by
competition from the newly patented
product.
Which of the following items should not be
amortized over the periods of estimated
benefit?
a. Franchise right
b. Goodwill arising from the purchase of
an existing business
c. Computer software
d. Patent right purchased from an
investor

It is an exclusive right or protection granted

to an author of a literary, musical or artistic
work.
a. Franchise
b. Trademark
c. Copyright
d. Royalty

Which of the following is not considered a

research and development activity?
a. Laboratory research aimed at
discovery of new knowledge
b. Conceptual formulation and design of
product or process alternatives
c. Routine design of tools, jigs, molds
and dies
d. Design, construction, and testing of
pre-production prototypes and models

All costs incurred to establish the

technological feasibility of a computer
software product to be marketed or leased
should be
a. capitalized as an intangible asset.
b. capitalized as an inventory.
c. capitalized as property, plant and
equipment.
d. charged to expense when incurred.

The capitalized software cost shall be

amortized
a. on a straight-line basis over its useful
life.
b. using a ratio of current revenue over
total expected revenue from the
product.
c. using the greater of the straight-line
rate or the ratio of current revenue
over total expected revenue from the
product.
d. uniformly over twenty years.