(Multiple Choice)
The Plaza Company originated late in 2006 and began operations on January 2, 2007. Plaza is engaged in conducting market research studies on behalf of manufacturers. Prior to the start of operations, the following costs were incurred:
Attorney€™s fees in connection with
organization of Plaza ....... $ 4,000
Improvements to leased offices
prior to occupancy ......... 7,000
Meetings of incorporators, state
filing fees and other
organization expenses ......... 5,000
$16,000
What is the amount of expense recognized for 2007?
a. $16,000
b. $9,000
c. $7,000
d. $4,000

2. A purchased patent has a remaining legal life of 15 years. It should be
a. Expensed in the year of acquisition
b. Amortized over 15 years regardless of its useful life
c. Amortized over its useful life if less than 15 years
d. Not amortized

3. Frye Company incurred research and development costs in 2007 as follows:
Equipment acquired for use in research
and development projects ..... $1,000,000
Depreciation on the equipment ..... 150,000
Materials used ............. 200,000
Compensation costs of personnel .... 500,000
Outside consulting fees ........ 100,000
Indirect costs appropriately allocated ..... 250,000
The total research and development costs charged in Frye€™s 2007 income statement should be
a. $650,000
b. $900,000
c. $1,200,000
d. $1,800,000

4. Which of the following assets typically are amortized?
Patents Trademarks
a. No ..... No
b. Yes .... Yes
c. No ..... Yes
d. Yes ..... No

5. What is the proper time or time period over which to match the cost of an intangible asset with revenues if it is likely that the benefit of the asset will last for an indefinite period?
a. 40 years
b. 50 years
c. Immediately
d. At such time as a reduction in value can be quantitatively determined

6. The general ledger of the Flint Corporation as of December 31, 2007 includes the following accounts:
Organization costs ........ $ 5,000
Deposits with advertising agency
(will be used to promote goodwill) .. 8,000
Discounts on bonds payable .... 15,000
Excess of cost over book value of net
assets of acquired subsidiary .... 70,000
Trademarks .......... 12,000
In the preparation of Flint€™s balance sheet as of December 31, 2007, what should be reported as total intangible assets?
a. $82,000
b. $87,000
c. $95,000
d. $110,000

7. Goodwill represents the excess of the cost of an acquired company over the
a. Sum of the fair values assigned to tangible assets acquired less liabilities assumed
b. Sum of the fair values assigned to identifiable assets acquired less liabilities assumed
c. Sum of the fair values assigned to intangible assets acquired less liabilities assumed
d. Book value of an acquired company

8. During 2003, Traco Machine Company spent $176,000 on research and development costs for an invention. This invention was patented on January 2, 2004 at a nominal cost that was expensed in 2004. The patent had a legal life of 20 years and an estimated useful life of eight years. In January 2008 Traco paid $16,000 for legal fees in a successful defense of the patent. Amortization for 2008 should be
a. $0
b. $1,000
c. $4,000
d. $26,000

9. Which of the following amounts incurred in connection with a trademark should be capitalized?

10. Sherwood Corporation incurred $68,000 of research and development costs in its laboratory to develop a patent that was granted on January 2, 2007. Legal fees and other costs associated with registration of the patent totaled $13,600. Sherwood estimates that the economic life of the patent will be eight years. What amount should Sherwood charge to patent amortization expense for the year ended December 31, 2007?
a. $0
b. $800
c. $1,700
d.$10,200

Transcribed Image Text:

a. b. C. d. Cost of a Successful Defense Yes Yes No Registration Fees No Yes Yes No 0 No