Problem 40-1 Multiple Choice (PAS 38)1. An intangible asset is
defined asa. An identifiable asset without physical substance.b. A
nonmonetary asset without physical substance.c. An identifiable
nonmonetary asset without physical substance.d. An identifiable
monetary and nonmonetary asset without physical substance.
2. An intangible asset is identifiable whena. It is separable.b.
It arises from contractual and other legal right.c. It is either
separable or it arises from contractual and other legal right.d. It
is neither separable nor it arises from contractual and other legal
right.
3. Which of the following statements is true in relation to
control by the entity of the intangible asset?a. The capacity of
the entity to control the economic benefits from an intangible
asset would normally stem from legal rights that are enforceable in
a court of law. b. The skill of employees arising out of the
benefits of training costs cannot be recognized as intangible
asset.c. Market share and customer loyalty cannot normally be
recognized as intangible asset because an entity cannot control the
action of customers.d. d. All of these statements are true.
4. An intangible asset shall be recognized ifa. It is probable
that future economic benefits attributable to the asset will flow
to the entity.b. The cost of the intangible asset can be measured
reliably.c. It is possible that future economic benefits
attributable to the asset can be measured reliably.d. It is
probable that future economic benefits attributable to the asset
can be measured reliably.
5. Which of the following statements is true concerning separate
acquisition of an intangible asset?a. If an intangible asset is
required separately, the cost of the intangible asset can usually
be measured reliably.b. If payment for an intangible asset is
deferred beyond normal credit terms, the cost is equal to the cash
price equivalent.c. The cost of a separately acquired intangible
asset comprises the purchase price and any directly attributable
cost of preparing the asset for the intended use.d. All of these
statements are true.
6. Which of the following statements is incorrect concerning
acquisition of an intangible asset as part of a business
combination?a. The cost of the intangible asset is based on the
fair value at the date of acquisition.b. If there is an active
market for the intangible asset, the fair value is equal to the
quoted price of an identical asset.c. If there is an active market
for the intangible asset, the fair value may also be equal to the
quoted price of a similar asset.d. The fair value of an
identifiable intangible asset acquired in a business combination
cannot be measured with sufficient reliability separately from
goodwill.
7. Which of the following statements is truein relation to
internally generated intangible asset?a. Internally generated
brand, masthead, publishing title, and customer list shall not be
recognized as an intangible asset.b. The cost of internally
generated intangible asset comprises all directly attributable
costs necessary to create, produce and prepare the asset for the
intended use.c. Internally generated goodwill shall not be
recognized as an intangible asset. d. All of these statements are
true.
8. The cost of an internally generated intangible asset includes
all of the following, excepta. Expenditure on materials used in
generating the intangible asset.b. Compensation costs of personnel
directly engaged in generating the asset.c. Fees to register a
legal right. d. Expenditure to on training staff to operate
asset.
9. All of the following expenditures are expensed when incurred,
excepta. Startup costs.b. Advertising and promotion costs.c.
Business relocation or reorganization costs.d. Payment in advance
of delivery of goods or the rendering of services.
10. Which of the following statements is true concerning
amortization and impairment of intangible assets?a. Intangible
assets with finite useful life are amortized over the useful
life.b. Intangible assets with finite useful lifer are tested for
impairment at the end of reporting period when there is an
indication of impairment.c. Intangible assets with indefinite
useful life are not amortized but are tested for impairment at
least annually. d. d. All of these statements are true.
Answers: Problem 40-1
1. C6. D2. C7. D3. D8. D4. D9. D5. D10. D
Problem 40-2 Multiple Choice (PAS 38)1. It is the systematic
allocation of the amortizable amount of an intangible asset over
the useful life.a. Amortizationb. Allocationc. Realizationd.
Expiration
2. The amortization method used shall reflect the pattern in
which the assets economic benefits are consumed by the entity. If
such pattern cannot be determined reliably, what is the
amortization method used?a. Straight lineb. Production methodc.
Diminishing balance methodd. Ratio of current years sales to the
expected sales
3. The factors that need to be considered in determining the
useful life of an intangible asset include all of the following,
excepta. Technical obsolescenceb. Expected action of competitorsc.
Expected usage of the asset by the entityd. Residual value
4. An intangible asset is regarded as having an indefinite
useful life whena. There is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows to the
entity.b. There is a foreseeable limit to the period over which the
asset is expected to generate net cash inflows to the entity.c. The
useful life of the intangible asset arises from contractual
right.d. The useful life of the intangible asset arises from legal
right.
5. The residual value of an intangible asset with a finite
useful life shall be assumed zero, excepta. When there is a
commitment by a third party to purchase the asset at the end of the
useful life.b. When there is an active market for the asset and it
is probable that such market will exist at the end of the useful
life.c. When there is a commitment by a third party to purchase the
asset at the end of the useful life or there is an active market
for the asset and it is probable that such market will exist at the
end of useful life.d. There are no exceptions.
6. An intangible asset acquired by way of government grant may
be initially recorded ata. Fair valueb. Nominal amount or zero plus
any directly attributable expenditurec. Either fair value or
nominal amount or zero plus directly attributable expenditure.d.
Neither fair value nor nominal account.
7. The cost of a separately acquired intangible asset comprises
the purchase price, including import duties and nonrefundable
purchases taxes, anda. Cost of introducing a new product or
service.b. Cost of conducting a business in a new location.c.
Administration and other general overhead costd. Directly
attributable cost of preparing the asset for the intended use.
8. Directly attributable costs of preparing the intangible asset
for the intended use include all, excepta. Cost of employee
benefits arising directly from bringing the asset to working
condition.b. Professional fee arising directly from bringing the
asset to working condition.c. Cost of testing whether the asset is
functioning properly.d. Initial operating loss.
9. After initial recognition, an intangible asset shall be
measured using thea. Cost modelb. Revaluation modelc. Either cost
model or revaluation modeld. Either cost model or fair value
model
10. Which of the following represents the maximum amortization
period mandated for an intangible asset with finite useful life?a.
10 yearsb. 20 yearsc. 40 yearsd. No arbitrary cap on the useful
life has been established.
Answers: Problem 40-2
1. A6. C2. A7. D3. D8. D4. A9. C5. C10. D
Problem 40-3 Multiple Choice (IFRS)1. Which does not qualify as
an intangible asset?a. Computer softwareb. Registered patentc.
Copyrightd. Notebook computer2. Which of the following would
qualify as an intangible asset?a. Advertising and promotionb.
College tuition fees paid to employees who decide to enroll in an
exclusive M.B.A program while working with the entityc. Operating
loss during the initial stage of the projectd. Legal cost paid to
lawyer to register a patent
3. Once recognized, an intangible asset can be carried ata. Cost
less accumulated amortizationb. Cost less accumulated amortization
and impairment lossesc. Revalued amount less accumulated
amortizationd. Cost plus a notional increase in fair value
4. Which disclosure is not required with respect to an
intangible asset?a. Useful life of the intangible assetb.
Reconciliation of carrying amount at the beginning and end of the
yearc. Contractual commitment for the acquisition of intangible
assetd. Fair value of similar intangible asset used by
competitor
5. Which is not a consideration in determining the useful life
of an intangible asset?a. Legal, regulatory or contractual
provisionb. Provision for renewal or extensionc. Initial costd.
Obsolescence
6. Amortization of an intangible asset with a finite useful life
shall commence whena. It is first recognized as an asset.b. It is
probable that it will generate economic benefit.c. It is available
for intended use.d. The cost can be identified with reasonable
certainty.
7. A brand name that was acquired separately shall initially be
recognized at a. Recoverable amountb. Either cost or fair value at
the choice of the acquirer c. Fair valued. Cost
8. The recognition criteria for an intangible asset include
which of the following conditions?a. The intangible asset must be
measured at cost.b. The cost can be measured reliably.c. It is
probable that future economic benefit will arise from use.d. It is
probable that future economic benefit will arise from use and the
cost can be measured reliably.
9. What is the appropriate method of amortizing intangible
asset?a. The straight line method, unless the pattern in which the
economic benefits are consumed can be determined reliably.b. The
double declining balance in all circumstances.c. A subjective
amount of periodic amortization.d. The straight liner method in all
circumstances.
10. Intangible assets with indefinite useful life are tested for
impairmenta. Quarterly at the quarterly reporting dateb. Annually
at the annual reporting datec. Biannually at the reporting dated.
There is no guidelines for impairment
Answers: Problem 40-3
1. D6. C2. D7. D3. B8. D4. D9. A5. C10. B
Problem 40-4 Multiple Choice (IFRS)1. Intangible assets are
reported in the statement of financial positiona. With an
accumulated amortization accountb. Under property, plant and
equipmentc. As a separate line itemd. All of these are allowed in
presenting intangible assets
2. An entity that acquires an intangible asset may use the
revaluation model for subsequent measurement only ifa. The useful
life of the intangible asset can be reliably determinedb. An active
market exists for the intangible asset.c. The cost of the
intangible asset can be measured reliably.d. The intangible asset
is a monetary asset.
3. Which of the following is a criterion that must be met in
order for an intangible asset to be recognized other than
goodwill?a. The fair value can be measured reliably.b. The asset is
the part of the activities aimed at gaining new scientific or
technical knowledge.c. The asset is expected to be used in the
production or supply of goods or services.d. The asset is
identifiable and lacks physical substance.
4. Operating losses incurred during the start-up years of a new
entity should bea. Accounted for and reported like any other
operating losses.b. Written off directly against retained
earnings.c. Capitalized as deferred charge and amortized over five
years.d. Capitalized as an intangible asset and amortized over
twenty years.
Answers: Problem 40-4
1. C2. B3. D4. A
Problem 40-5 Multiple Choice (IAA)1. Which of the following does
not describe an intangible asset?a. The asset lacks physical
existence.b. The asset is monetary.c. The asset provides long-term
benefit.d. The asset is classified as non-current asset.
2. Which of the following is a characteristic of an intangible
asset?a. Physical existenceb. Claim to a specific amount of cash in
the futurec. Long-livedd. Held for sale
3. Cost incurred internally to create intangible asset area.
Capitalizedb. Capitalized if useful life is indefinitec. Expensed
when incurredd. Expensed if useful life is limited
4. Which of the following methods of amortization is normally
used for an intangible asset?a. Sum of the years digitb. Straight
linec. Units of productiond. Double declining balance
5. Under current accounting practice, intangible assets are
classified asa. Amortizable and un-amortizableb. Limited life and
indefinite lifec. Specifically identifiable and goodwill typed.
Legally restricted and goodwill type
6. Which type of intangible asset is amortized?a. Limited lifeb.
Indefinite lifec. Both limited life and indefinite lifed. Neither
limited life nor indefinite life
7. Entities should evaluate indefinite life intangible assets at
least annually fora. Recoverabilityb. Amortizationc. Impairmentd.
Estimated useful life
8. The major problem of accounting for an intangible asset is
determining a. Fair valueb. Separabilityc. Residual valued. Useful
life
9. The factors in determining the useful life of an intangible
asset include all of the following, excepta. The expected use of
the asset.b. Any legal or contractual provision that may limit the
useful life.c. Any provision for renewal or extension of legal life
of the asset.d. The amortization method used.
10. Which of the following is not an intangible asset?a. Trade
name b. Research and development costc. Franchised. Copyright
Answers: Problem 40-2
1. B6. A2. C7. C3. C8. D4. B9. D5. B10.B
Problem 41-1 Multiple Choice (IAA)1. Patent is an example of
which general category of intangible asset?a. Market-relatedb.
Customer-relatedc. Artistic-relatedd. Technology-based
2. A patent should be amortized overa. Twenty yearsb. The useful
lifec. The useful life or twenty years, whichever is longerd. The
useful life or twenty years, whichever is shorter
3. When a patent is amortized, the credit is usually made toa.
The patent accountb. An accumulated amortization accountc. An
accumulated depreciation accountd. The expensed account
4. The cost of successfully depending a patent from infringement
by a competitor should be charged to a. Patent and amortized over
the legal life of the patent.b. Legal fees and amortized over five
years.c. Expensed of the period.d. Amortized over the remaining
useful life of the patent.
5. The cost of purchasing right for a product that might
otherwise have seriously competed with the purchasers patented
product should bea. Expensed in the current period.b. Amortized
over the legal life of the purchased patent.c. Added to factory
overhead.d. Amortized over the remaining useful life of the patent
for the product whose market would have been impaired be
competition from the newly patented product.
Answers: Problem 41-1
1. D2. D3. A4. C5. D
Problem 41-2 Multiple Choice (AICPA Adopted)1. Goodwill shall be
recognized only when a. It is purchased from another entityb. It
can be established that a definite benefit has resulted from good
name, capable staff or reputationc. It is acquired through the
purchase of another entityd. An entity had above normal earnings
for five years
2. What does the standard require with respect to accounting for
goodwill?a. Goodwill should be amortized over a five-year period.b.
Goodwill should be amortized over the useful life.c. Goodwill
should be recorded and never adjusted.d. Goodwill should be
periodically evaluated for impairment.
3. Goodwill should be tested periodically for impairmenta. For
the entity as a wholeb. At the subsidiary levelc. At the industry
segment leveld. At the operating segment level
4. In performing an annual test for the impairment of goodwill
for a cash generating unit, the fair value of the unit exceeds the
carrying amount. Which statement is true concerning the test of
impairment?a. Impairment is not indicated and no analysis is
necessary.b. Goodwill should be written down as impaired.c. The
assets should be valued to determine if there has been an
impairment of goodwill.d. Goodwill should be retested at the entity
level.
5. An impairment loss recognized for goodwilla. Shall not be
reversed in a subsequent year.b. May be reversed fully in a
subsequent year.c. May be reversed partly in a subsequent year.d.
Shall be reversed in a subsequent year.
Answers: Problem 41-2
1. C2. D3. D4. A5. A
Problem 41-3 Multiple Choice (IAA)1. Purchased goodwill shoulda.
Be written off against retained earnings.b. Be written off as other
expense.c. Be written off by systematic charge as operating expense
over the period benefited.d. Not be amortized.
2. The intangible asset goodwill may be a. Capitalized only when
purchased.b. Capitalized either when purchased or created
internally.c. Capitalized only when created internally.d. Written
off directly against retained earnings.
3. In a business combination, the excess of acquisition cost
over the fair value of the identifiable net assets acquired isa.
Other assetb. Indirect costc. Goodwilld. A bargain purchase
4. Goodwill shall be tested for impairmenta. If there is an
indication of impairmentb. Annuallyc. Every 5 yearsd. On the
acquisition of a subsidiary
5. Which intangible asset should be reported as a separate line
item in the statement of financial position?a. Goodwillb.
Franchisec. Patentd. Trademark
Answers: Problem 41-3
1. D2. A3. C4. B5. A
Problem 41-4 Multiple Choice (IAA)1. A trademark is an example
of which general category of intangible asset?a. Market-relatedb.
Customer-relatedc. Artistic-relatedd. Contract-based
2. Which of the following costs associated with a trademark
should not be capitalized?a. Attorney feeb. Consulting feec.
Research and development feed. Design cost
3. Which of the following should not be capitalized as cost of
trademark?a. Cost of successful litigation of the trademarkb.
Registration with Intellectual Property Officec. Design costd.
Legal fee
4. What is the legal life of trademark?a. 10 yearsb. 20 yearsc.
10 years and renewable after every 10 yearsd. 20 years and
renewable after every 20 years
5. Which of the following statements is incorrect in relation to
trademark?a. A trademark can be regarded as an intangible asset
with an indefinite useful life.b. A trademark is an intangible
asset.c. A trademark is not amortized but tested for impairment at
least annually.d. A trademark is amortized and tested for
impairment whenever there is an indication of impairment.
Answers: Problem 41-4
1. A2. C3. A4. C5. D
Problem 42-1 Multiple Choice (IAA)1. A copyright is an example
of which general category of intangible asset?a. Market-relatedb.
Customer-relatedc. Artistic-relatedd. Contract-based
2. Franchise and broadcast rights are an example of which
general category of intangible asset?a. Market-relatedb.
Customer-relatedc. Artistic-relatedd. Contract-based
3. Customer list and order backlog are an example of which
general category of intangible asset?a. Market-relatedb.
Customer-relatedc. Artistic-relatedd. Contract-based
4. Copyright should be amortized overa. The legal lifeb. The
life of the creator plus fifty yearsc. Twenty yearsd. The useful
life or legal life, whichever is shorter
5. Which of the following intangible assets should not be
amortizeda. Copyrightb. Customer listc. Perpetual franchised. All
of the intangible assets should be amortized
6. Which of the following should be expensed as incurred by the
franchisee for a franchise with finite useful life?a. Amount paid
to the franchisor for the franchiseb. Payment to an entity, other
than the franchisor, for that entitys franchiseec. Legal fees paid
to the franchisees lawyers to obtain the franchised. Periodic
payments to the franchisor based on the franchisees revenue
7. An airline entity purchased airline gate rights at an
international airport with a legal life of five years. However, the
entity has the ability and right to extend the rights every ten
years for an indefinite period of time. Over what period of time
should the entity amortize the gate right?a. 5 yearsb. 15 yearsc.
40 yearsd. The rights should not be amortized
8. A lessee incurred cost to construct walkway and landscaping
to improve leased property. The useful life of the walkway and
landscaping cost is fifteen years. The remaining term of the
non-renewable lease is twenty years. The walkway and landscaping
cost should bea. Capitalized as leasehold improvement and
depreciated over twenty years.b. Capitalized as leasehold
improvement and depreciated over fifteen years.c. Capitalized as
leasehold improvement and expensed in the year in which the lease
expires.d. Expensed as incurred.
9. Start-up cost including legal and state fees to organize a
new entity should bea. Capitalized and never amortized.b.
Capitalized and amortized over a reasonable period.c. Capitalized
and tested for impairment annually.d. Expensed as incurred.
Answers: Problem 42-11. C6. D2. D7. D3. B8. D4. D9. D5. C
Problem 42-2 Multiple Choice (IFRIC 12)1. 1. It is an
arrangement whereby a public sector entity grants a private
concession operator to provide services that give the public access
to major economic and social infrastructure, such as expressway and
telecommunication network.a. Service concessionb. Loanc. Government
grantd. Government assistance
2. The private concession operator shall recognize the
infrastructure asset asa. Intangible assetb. Financial assetc.
Either intangible asset or financial assetd. Neither intangible nor
financial asset
3. The infrastructure asset shall be recognized by the
concession operator as an intangible asset whenI. The operator has
received a right or a license to charge users for the public
service.II. The right to change the users for the public service is
not an unconditional right because the revenue receivable is not
agreed upon in advance but is dependent on the use of the asset.a.
I onlyb. II onlyc. Both I and IId. Neither I nor II
4. The infrastructure asset shall be recognized by the
concession operator as a financial asset whenI. The operator has an
unconditional contractual right to receive cash over the life of
the arrangement.II. The grantor has contractually guaranteed to pay
the operator the specified or determinable amount.a. I onlyb. II
onlyc. Both I and IId. Neither I nor II
5. The infrastructure asset recognized by the private concession
operator as a financial asset should be accounted for asa.
Financial asset at amortized costb. Financial asset at fair value
through profit or lossc. Either financial asset at amortized cost
or financial asset at fair value through profit or lossd. Neither
financial asset at amortized cost nor financial asset at fair value
through profit or loss
Answers: Problem 42-2
1. A2. C3. C4. C5. C
Problem 43-1 Multiple Choice (IFRS)1. Which statement in
relation to research and development is incorrect?a. Expenditure
during the research phase of a project cannot be capitalized as an
intangible assetb. Expenditure during the development phase of
project may sometimes be capitalized as an intangible assetc. The
project being developed should have already been put into
commercial productiond. Development involves the application of
research finding
2. A dot-com entity has recently completed a highly publicized
research and development project. Which of the following statements
is the most accurate?a. Costs incurred during the research phase
can be capitalized.b. Costs incurred during the development phase
can be capitalized if criteria such as technical feasibility of the
project being established are met.c. Training cost of technicians
used in research can be capitalized.d. Designing of jigs and tools
would qualify as research activities.
3. Which principle best describes the current method of
accounting for research and development cost?a. Associating cause
and effectb. Systematic and rational allocationc. Income tax
minimizationd. Immediate recognition as an expense
4. Web site development costs incurred for the purpose of
promoting and advertising a project should bea. Expensed as
incurredb. Recognized as an intangible asset with a finite lifec.
Recognized as an intangible asset with indefinite lifed. Included
as component of other comprehensive income
Answers: Problem 43-11. C2. B3. D4. A
Problem 43-2 Multiple Choice (AICPA Adopted)1. The proper
accounting for costs incurred in creating computer software is a.
To capitalize all costs until the software is soldb. To charge
research and development expense when incurred until technological
feasibility has been established for the productc. To charge
research and development expense only if the computer software has
alternative future use.d. To capitalize all cost as incurred until
a detailed program design or working model is created.
2. Which of the following statements is true regarding the
proper accounting treatment for internal-use software costs?I.
Preliminary costs should be capitalized as incurred.II. Application
and development costs should be capitalized as incurreda. I onlyb.
II onlyc. Both I and IId. Neither I nor II
3. Which of the following statements is incorrect regarding
internal-software?a. The application and development costs of
internal-use software should be amortized on the straight line
basis unless another systematic and rational basis is more
appropriate.b. Internal-use software is considered to be software
that is marketed as a separate product or as part of a product or
process.c. The costs of testing and installing computer hardware
should be capitalized as incurred.d. The costs of training and
application maintenance should be expensed as incurred.
4. A computer software purchased as an operating system for the
hardware or as an integral part of a computer controlled machine
tool that cannot operate without the specific software shall be
treated asa. Intangible assetb. Property, plant and equipmentc.
Inventoryd. Expense
5. At the beginning of current year, an entity had capitalized
cost for a new computer software product with an economic life of
four years. Sales for the current year were ten percent of expected
total sales of the software. The pattern of future sales cannot be
measured reliably. At year-end, the software had a net realizable
value equal to eighty percent of the capitalized cost. Thee
unamortized cost reported in the year end statement of financial
position should bea. Net realizable valueb. Ninety percent of net
realizable valuec. Seventy five percent of capitalized costd.
Ninety percent of capitalized cost
Answers: Problem 43-2
1. B2. B3. B4. B5. C
Problem 43-3 Multiple Choice (AICPA Adopted)1. Which of the
following research and development costs should be capitalized and
amortized over current and future periods?a. Research and
development general laboratory buildingb. Inventory used for a
specific research projectc. Administrative salaries allocated to
research and developmentd. Research findings purchased from another
entity to aid a particular research project currently in
process
2. If an entity constructs a laboratory building to be used as a
research and development facility, the cost of the laboratory
building is matched against earnings asa. Research and development
expense in the period of constructionb. Depreciation deducted as
part of research and development expensec. Depreciation or
immediate write-off depending on entity policyd. An expense at such
time as productive research has been obtained from the facility.3.
Which of the following research and development costs should be
capitalized and amortized over current and future periods?a. Labor
and material costs incurred in building a prototype or modelb. Cost
of testing equipment that will also be used in another separate
research and development project scheduled to begin next yearc.
Administrative salaries allocated to research and developmentd.
Research findings purchased from another entity to aid a particular
research project currently in process
4. A research and development activity for the cost would be
expensed as incurred isa. Design, construction and testing of
preproduction prototype or modelb. Quality control during
commercial productionc. Periodic design changes to existing
productd. Adaptation of an existing capability to a particular
requirement or customer need
5. 5. Which is not considered a research and development
activity?a. Routine ongoing effort to refine, enrich or improve
quality of existing productb. Laboratory research aimed at
discovery of new knowledgec. Conceptual formulation and design of
possible product or processd. Design, construction and operation of
a pilot plant.
6. At the beginning of current year, an entity purchased
equipment for use in developing a new product. The entity used the
straight line depreciation method. The equipment could provide
benefits over a 10-year period. However the new product development
is expected to take five years, and the equipment can be used only
for this project. The expense for the current year in relation to
the equipment equalsa. The total cost of the equipmentb. One-fifth
of the cost of the equipment c. One-tenth of the cost of the
equipmentd. Zero
Answers: Problem 43-3
1. A2. B3. D4. A5. A6. A
Problem 43-3 Multiple Choice (IAA)1. How should research and
development be accounted for?a. Must be capitalized when incurred
and then amortized over useful lifeb. Must be expensed in the
period incurredc. May be either capitalized or expensed when
incurred depending upon the materialityd. Must be expensed in the
period incurred unless it can be clearly demonstrated that the
expenditure will have alternative future use or unless
contractually reimbursable
2. Which of the following statements is true about accounting
for development cost?a. Development cost must be expensedb.
Development cost is always deferred and expensed against future
revenuec. Development may be capitalized as an intangible asset in
very restrictive situationsd. Development cost is recorded as
component of other comprehensive income
3. Which of the following would be considered research and
development?a. Routine effort to refine an existing product b.
Periodic alteration to existing production linec. Marketing
research to promote new product d. Construction of prototype
4. 4. Which of the following cost should not be capitalized?a.
Acquisition cost of equipment cost to be used on current and future
research projectsb. Engineering cost incurred to advance the
project to the full production stagec. Cost incurred to file for
patentd. Cost of testing prototype before economic feasibility has
been demonstrated
5. Which of the following cost should be excluded from research
and development expense?a. Modification of the design off a
productb. Acquisition of research and development equipment for the
use on a current project onlyc. Cost of marketing research for a
new productd. Engineering activity required to advance the design
of a product to the manufacturing stage.
6. Which of the following would not be considered research and
development activity?a. Adaptation of an existing capability to a
particular requirement or customer needb. Application of research
finding or other knowledge to a plan for a new productc. Laboratory
research aimed at discovery of new knowledged. Conceptual
formulation and design of possible product alternative
7. Which of the following is not a criterion which must be met
before development cost may be capitalized?a. The entity has
sufficient financial resources to complete the projectb. The entity
intends to complete the project and either use or sell the
intangible assetc. The entity can reliably identify the research
cost incurred to bring the project to economic feasibilityd. The
project has achieved technical feasibility
8. Which of the following costs should be capitalized?a.
Acquisition cost of equipment to be used on the current research
project onlyb. Engineering cost incurred to advance the product to
the full production stagec. Cost of research to determine whether a
market for the product existd. Salaries of research staff
9. Research activities include all of the following except,a.
Search for application of research finding or other knowledgeb.
Search for product or process alternativec. Formulation and design
of the possible product or process alternatived. Design,
construction and testing of preproduction prototype and model
10. Development activities include all of the following
except,a. Design of tools, jigs, molds and dies involving new
technologyb. Design, construction and operation of a pilot plant
that is not of a scale economically feasible for commercial
productionc. Design, construction and testing of a chosen
alternative for a new or improved product or processd. Laboratory
activities aimed at obtaining new knowledge
Answers: Problem 43-4
1. D6. A2. C7. C3. D8. B4. D9. D5. C10.D