INTERMEDIATE ACCOUNTING 1
EXAM QUESTIONS WITH
CORRECT SOLUTIONS||100%
GUARANTEED PASS||UPDATED
2026/2027 SYLLABUS||<<RECENT
VERSION>>
Which accounting method prorates the cost of a limited-life intangible asset over
the life of the asset?
A) Amortization
B) Depletion
C) Depreciation
D) Inflation - ANSWER ✓ Amortization
A company purchases a patent from another company in exchange for $20,000
cash and a truck. The truck has a fair value of $35,000 and a book value of
$24,000.
How much should the purchasing company debit its patent asset for? - ANSWER
✓ Answer = $55,000
Fair Value + Cash = patent asset value
Truck FV = 35,000+20,000 = $55,000
Over what period of time should a company amortize a patent?
A) Over the useful life of the patent
B) Over the legal life of the patent
C) Over the shorter of the useful life and legal life of the patent
D) Over the longer of the useful life and legal life of the patent - ANSWER ✓
Over the shorter of the useful life and legal life of the patent
,Why is goodwill not amortized?
A) Because goodwill has a limited life
B) Because goodwill never loses value
C) Because goodwill has an indefinite life
D) Because goodwill cannot be sold - ANSWER ✓ Because goodwill has an
indefinite life
Last year, Company A purchased Company B for $10 million, including goodwill
of $2.5 million. During its annual impairment test, Company A determines that
Company B has net identifiable assets with a value of $6 million excluding
goodwill, and a fair market value of $6.5 million.
How much impairment loss should Company A recognize for goodwill this year? -
ANSWER ✓ Answer = $2,000,000
Step 1 = Calculate Carrying Value:
Carrying Value = Net Identifiable Asset + Goodwill
CV = 6,000,000 + 2,500,000 = 8,500,000
Step 2 = Determine Impairment occured
(Is Carrying Value is greater than Fair Market Value = if yes impairment occured)
CV = 8.5m & FMV = 6.5m CV is greater
Step 3 = Calculate Impairment loss
Carrying Value - Fair Market Value = Impairment loss
8,500,000 - 6,500,000 = 2,000,000
Which of the following characterizes a research activity?
A) Altering an existing product
B) Refining an existing process
C) Discovering a new product
D) Marketing a new product - ANSWER ✓ Discovering a new product
A company purchases new laboratory equipment for a research project. The
company expects to use the equipment for the research project for five years and
does not anticipate having a productive purpose for the equipment thereafter.
How should the company account for the equipment purchase?
A) Expense it immediately as a research and development component
B) Capitalize it as a fixed asset and depreciate it over its useful life
,C) Capitalize it as an intangible asset component and amortize it over five years
D) Expense it over a five-year period - ANSWER ✓ Expense it immediately as a
research and development component
Equity - ANSWER ✓ (Net Assets) Called Shareholders' equity or Stockholders'
Equity for a corporation, it is the residual interest in the assets of an entity that
remains after deducting its liabilities.
Investments by Owners - ANSWER ✓ Increases in equity of a particular business
enterprise resulting from transfers to it from other entities of something of value to
obtain or increase ownership interests in it.
Distributions to owners - ANSWER ✓ Decreases in equity of an entity resulting
from transferring assets, rendering services, or incurring liabilities by the entity to
owners.
Comprehensive Income - ANSWER ✓ The change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners.
Revenues - ANSWER ✓ Inflows or other enhancements of assets of an entity or
settlements of its liabilities (or a combination of both) from delivering or
producing goods, rendering services, or carrying out other activities.
In the single-step income statement
A. just two groupings exist - revenues and expenses
B. interest revenue and rental revenue are reported as other revenues and gains
C. expenses are classified by functions, such as merchandising, selling, and
administration
D. an income from operations figure is precedented - ANSWER ✓ A
Usual and infrequent gains and losses
A. include restructuring charges
B. include restructuring charges and are reported net of tax
C. include the elimination of a component of the business
D. are reported net of tax - ANSWER ✓ A
, Which of the following would be reported in a separate income statement
category, separately from continuing operations on the income statement?
A. unusual losses
B. income tax expense
C. unusual gains
D. discontinued operations - ANSWER ✓ D
Barger Enterprises has an extraordinary loss of $300,000, an unusual gain of
$700,000, and a tax rate of 30%. At what amount should Barger report each item?
Extraordinary loss
Unusual gain
1.
$(300,000)
$700,000
2.
(300,000)
490,000
3.
(210,000)
700,000
4.
(210,000)
490,000
A. 1
B. 2
C. 3
D. 4 - ANSWER ✓ A
Which limitation of an income statement occurs when one company uses an
accelerated depreciation method while another company uses straight line
depreciation?
A. Companies omit from the income statement items they can not measure
reliability.
EXAM QUESTIONS WITH
CORRECT SOLUTIONS||100%
GUARANTEED PASS||UPDATED
2026/2027 SYLLABUS||<<RECENT
VERSION>>
Which accounting method prorates the cost of a limited-life intangible asset over
the life of the asset?
A) Amortization
B) Depletion
C) Depreciation
D) Inflation - ANSWER ✓ Amortization
A company purchases a patent from another company in exchange for $20,000
cash and a truck. The truck has a fair value of $35,000 and a book value of
$24,000.
How much should the purchasing company debit its patent asset for? - ANSWER
✓ Answer = $55,000
Fair Value + Cash = patent asset value
Truck FV = 35,000+20,000 = $55,000
Over what period of time should a company amortize a patent?
A) Over the useful life of the patent
B) Over the legal life of the patent
C) Over the shorter of the useful life and legal life of the patent
D) Over the longer of the useful life and legal life of the patent - ANSWER ✓
Over the shorter of the useful life and legal life of the patent
,Why is goodwill not amortized?
A) Because goodwill has a limited life
B) Because goodwill never loses value
C) Because goodwill has an indefinite life
D) Because goodwill cannot be sold - ANSWER ✓ Because goodwill has an
indefinite life
Last year, Company A purchased Company B for $10 million, including goodwill
of $2.5 million. During its annual impairment test, Company A determines that
Company B has net identifiable assets with a value of $6 million excluding
goodwill, and a fair market value of $6.5 million.
How much impairment loss should Company A recognize for goodwill this year? -
ANSWER ✓ Answer = $2,000,000
Step 1 = Calculate Carrying Value:
Carrying Value = Net Identifiable Asset + Goodwill
CV = 6,000,000 + 2,500,000 = 8,500,000
Step 2 = Determine Impairment occured
(Is Carrying Value is greater than Fair Market Value = if yes impairment occured)
CV = 8.5m & FMV = 6.5m CV is greater
Step 3 = Calculate Impairment loss
Carrying Value - Fair Market Value = Impairment loss
8,500,000 - 6,500,000 = 2,000,000
Which of the following characterizes a research activity?
A) Altering an existing product
B) Refining an existing process
C) Discovering a new product
D) Marketing a new product - ANSWER ✓ Discovering a new product
A company purchases new laboratory equipment for a research project. The
company expects to use the equipment for the research project for five years and
does not anticipate having a productive purpose for the equipment thereafter.
How should the company account for the equipment purchase?
A) Expense it immediately as a research and development component
B) Capitalize it as a fixed asset and depreciate it over its useful life
,C) Capitalize it as an intangible asset component and amortize it over five years
D) Expense it over a five-year period - ANSWER ✓ Expense it immediately as a
research and development component
Equity - ANSWER ✓ (Net Assets) Called Shareholders' equity or Stockholders'
Equity for a corporation, it is the residual interest in the assets of an entity that
remains after deducting its liabilities.
Investments by Owners - ANSWER ✓ Increases in equity of a particular business
enterprise resulting from transfers to it from other entities of something of value to
obtain or increase ownership interests in it.
Distributions to owners - ANSWER ✓ Decreases in equity of an entity resulting
from transferring assets, rendering services, or incurring liabilities by the entity to
owners.
Comprehensive Income - ANSWER ✓ The change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners.
Revenues - ANSWER ✓ Inflows or other enhancements of assets of an entity or
settlements of its liabilities (or a combination of both) from delivering or
producing goods, rendering services, or carrying out other activities.
In the single-step income statement
A. just two groupings exist - revenues and expenses
B. interest revenue and rental revenue are reported as other revenues and gains
C. expenses are classified by functions, such as merchandising, selling, and
administration
D. an income from operations figure is precedented - ANSWER ✓ A
Usual and infrequent gains and losses
A. include restructuring charges
B. include restructuring charges and are reported net of tax
C. include the elimination of a component of the business
D. are reported net of tax - ANSWER ✓ A
, Which of the following would be reported in a separate income statement
category, separately from continuing operations on the income statement?
A. unusual losses
B. income tax expense
C. unusual gains
D. discontinued operations - ANSWER ✓ D
Barger Enterprises has an extraordinary loss of $300,000, an unusual gain of
$700,000, and a tax rate of 30%. At what amount should Barger report each item?
Extraordinary loss
Unusual gain
1.
$(300,000)
$700,000
2.
(300,000)
490,000
3.
(210,000)
700,000
4.
(210,000)
490,000
A. 1
B. 2
C. 3
D. 4 - ANSWER ✓ A
Which limitation of an income statement occurs when one company uses an
accelerated depreciation method while another company uses straight line
depreciation?
A. Companies omit from the income statement items they can not measure
reliability.
