ACCOUNTING 5110 EXAM TWO 2025
QUESTIONS AND ANSWERS
1. lack physical existence, derive value from the rights and privileges granted to the company
2. non financial instruments - ANS what are the main characteristics of an intangible asset
- Generally expensed
- Only capitalize direct costs incurred in developing the intangible, such as legal costs -
ANS internally created intangibles
limited life tangibles - ANS companies only amortize their
an indefinite life - ANS a trade mark or trade name has
intangible assets that occur as a result of interactions with outside parties, like customer lists,
contractual agreements and production backlogs - ANS Customer-related intangible assets
amortized over their useful life - ANS customer related intangibles should be
operating expense - ANS a company should amortize the cost of a franchise or license with a
limited life as an ______ _____ over the useful life
NOT - ANS payments made to franchise fees do ____ represent an asset because they do not
relate to the future rights to use the property
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, shorter - ANS companies should amortize the cost of a patent over its legal life or its useful
life, whichever is
measured as the excess of the cost of purchase over the fair value of the net identifiable assets
purchased - ANS Goodwill
NOT - ANS goodwill generated internally should ____ be capitalized in the accounts
NOT - ANS goodwill is considered to have an indefinite life and therefore should ___ be
amortized
gain - ANS in a bargain purchase situation the excess amount is recorded as a
A test to determine whether an impairment of a long-lived asset has occurred. If the sum of the
expected future net cash flows (undiscounted) is less than the carrying amount of the asset, the
asset is considered impaired. - ANS recoverability test
This test measures the impairment loss by comparing the asset's fair value with its carrying
amount - ANS fair value test
fair value - ANS intangibles, except goodwill, should only use the ____ ____ test when testing
for impairment
1. identifying the costs associated with particular activities, projects, or achievements
2. determining the magnitude of the future benefits and length of time over which such
benefits may be realized - ANS what are the two difficulties in accounting for R&D
expenditures
expense - ANS companies must ____ all R&D costs when incurred
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QUESTIONS AND ANSWERS
1. lack physical existence, derive value from the rights and privileges granted to the company
2. non financial instruments - ANS what are the main characteristics of an intangible asset
- Generally expensed
- Only capitalize direct costs incurred in developing the intangible, such as legal costs -
ANS internally created intangibles
limited life tangibles - ANS companies only amortize their
an indefinite life - ANS a trade mark or trade name has
intangible assets that occur as a result of interactions with outside parties, like customer lists,
contractual agreements and production backlogs - ANS Customer-related intangible assets
amortized over their useful life - ANS customer related intangibles should be
operating expense - ANS a company should amortize the cost of a franchise or license with a
limited life as an ______ _____ over the useful life
NOT - ANS payments made to franchise fees do ____ represent an asset because they do not
relate to the future rights to use the property
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 1
, shorter - ANS companies should amortize the cost of a patent over its legal life or its useful
life, whichever is
measured as the excess of the cost of purchase over the fair value of the net identifiable assets
purchased - ANS Goodwill
NOT - ANS goodwill generated internally should ____ be capitalized in the accounts
NOT - ANS goodwill is considered to have an indefinite life and therefore should ___ be
amortized
gain - ANS in a bargain purchase situation the excess amount is recorded as a
A test to determine whether an impairment of a long-lived asset has occurred. If the sum of the
expected future net cash flows (undiscounted) is less than the carrying amount of the asset, the
asset is considered impaired. - ANS recoverability test
This test measures the impairment loss by comparing the asset's fair value with its carrying
amount - ANS fair value test
fair value - ANS intangibles, except goodwill, should only use the ____ ____ test when testing
for impairment
1. identifying the costs associated with particular activities, projects, or achievements
2. determining the magnitude of the future benefits and length of time over which such
benefits may be realized - ANS what are the two difficulties in accounting for R&D
expenditures
expense - ANS companies must ____ all R&D costs when incurred
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 2
