Acct 553 Federal Taxes and Management Decisions Midterm Exam

ACCT 553 Federal Taxes and Management Decisions Midterm Exam
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1. (TCO C) Under current accounting practice, intangible assets are classified as (Points: 5)

amortizable or unamortizable.
limited-life or indefinite-life.
specifically identifiable or goodwill-type.
legally restricted or goodwill-type.


2. (TCO C) Which of the following intangible assets should not be amortized? (Points: 5)

Copyrights
Customer lists
Perpetual franchises
All of these intangible assets should be amortized.


3. (TCO C) The intangible asset goodwill may be (Points: 5)

capitalized only when purchased.
capitalized either when purchased or created internally.
capitalized only when created internally.
written off directly to retained earnings.


4. (TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of ten years. On January 1, 2010, ELO spent $22,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is five years. What amount should be reported for patent amortization expense for 2010? (Points: 5)

$20,600.
$20,000.
$18,800.
$15,600.


5. (TCO C) During 2011, Bond Company purchased the net assets of May Corporation for $1,000,000. On the date of the transaction, May had $300,000 of liabilities. The fair value of May’s assets when acquired were as follows:


How should the $500,000 difference between the fair value of the net assets acquired ($1,500,000) and the cost ($1,000,000) be accounted for by Bond? (Points: 5)
The $500,000 difference should be credited to retained earnings.
The $500,000 difference should be recognized as a gain.
The current assets should be recorded at $540,000 and the noncurrent assets should be recorded at $760,000.
A deferred credit of $500,000 should be set up and then amortized to income over a period not to...