Financial Accounting Quiz: Intangible Assets And Amortization

A company acquired a customer list for $240,000. The company expects to benefit from the list over 4 years. Due to expected customer attrition, the pattern of benefits is estimated to be 40% in Year 1, 30% in Year 2, 20% in Year 3, and 10% in Year 4. If the company's amortization policy is to reflect the pattern of economic benefits, what is the carrying amount of the customer list at the end of Year 2?

A company's balance sheet includes the following items in its 'Other Assets' section: (1) a three-year license to use specific patented technology, acquired for $90,000; (2) prepaid property taxes for the next 18 months of $36,000; and (3) bond issue costs of $50,000, related to bonds payable with a 10-year term. Which of these items should be classified and accounted for as an intangible asset subject to amortization?

Apex Software is developing a new logistics application. During the year, it incurred the following costs: $150,000 in research and planning before technological feasibility was established; $200,000 for coding and testing after technological feasibility was established but before the product master was completed; and $50,000 for producing product masters for training materials. What amount should Apex capitalize as a software development intangible asset?

Vortex Corp. purchased several assets from a competitor for a lump-sum price of $1,000,000. The fair values of the assets acquired were as follows: land for $300,000, a building for $600,000, and a customer list for $300,000. The customer list is expected to have a useful life of 5 years. What is the amortization expense for the customer list for the first full year?

On January 1, Year 1, a company held a patent with a carrying amount of $180,000 and a remaining useful life of 6 years. In July of Year 1, the company incurred legal fees of $45,000 in a successful defense of the patent. The company determined that the successful defense did not extend the patent's original useful life. What is the patent amortization expense for the year ended December 31, Year 1?

As part of a business acquisition, a company paid a key executive of the acquired firm $150,000 for a covenant not to compete for a period of 5 years. The payment was made on January 1, Year 1. What is the carrying amount of the non-compete agreement on the company's balance sheet as of December 31, Year 2?

Which of the following journal entries correctly records the annual amortization of a patent, assuming the company uses an accumulated amortization account?

During its first year of operations, a company incurred the following costs: (1) Laboratory research aimed at discovery of new knowledge: $80,000; (2) Legal fees for securing a patent on a new product developed: $25,000; and (3) Marketing costs to promote the new product: $40,000. What is the total amount of these costs that should be expensed as incurred for the year?

A company reported net income of $500,000 for the year. The company also recorded $60,000 of amortization expense on its patents. There were no other non-cash expenses or gains/losses, and all sales and operating expenses were cash transactions. In preparing the statement of cash flows using the indirect method, what is the net cash provided by operating activities?

On January 1, a company paid an initial fee of $400,000 for a 10-year franchise. The franchise agreement also requires an annual contingent payment equal to 2% of the franchisee's annual revenue. For the first year, the company's revenue was $1,500,000. What is the total franchise-related expense for the first year?

A company's records show the following items and amounts: Internally-generated goodwill ($200,000), Costs of training employees on a new system ($50,000), Patent purchased from an inventor ($150,000), and Research and development costs ($100,000). What is the total amount that should be reported as intangible assets on the company's year-end balance sheet?

On January 1, Zenith Inc. acquired a franchise from a national chain. The agreement required an initial payment of $500,000 and annual payments of $20,000 for general services provided by the franchisor. Zenith also paid $30,000 in legal fees related to the acquisition of the franchise rights. The franchise has a useful life of 10 years. What is the total amount of expense related to the franchise that Zenith should report on its income statement for the first year?

A company acquires a patent for $100,000 that has a 10-year useful life. At the end of the second year, the company unsuccessfully defends the patent in an infringement lawsuit, incurring $30,000 in legal fees. The loss of the lawsuit renders the patent worthless. What is the total loss related to the patent that the company should recognize in the second year?

A company holds a patent accounted for under U.S. GAAP with a carrying amount of $200,000. During the year, due to its market dominance, an independent appraiser determines the patent's fair value is now $500,000. How should the company account for this increase in value?

On January 1, Year 1, Omni Corp. purchased a patent for $360,000. The patent had a remaining legal life of 15 years, but Omni estimated its useful life would only be 10 years. On January 1, Year 3, Omni determined that a competitor's new product would shorten the patent's remaining useful life to only 4 more years (i.e., ending December 31, Year 6). What is the amortization expense for the patent that Omni should record for the year ended December 31, Year 3?

On January 1, Year 1, Parent Co. acquired Subsidiary Co. in a business combination that resulted in the recognition of $500,000 of goodwill. Also during Year 1, Parent Co. purchased a trademark for $120,000, which is expected to be renewed indefinitely. Finally, Parent Co. acquired a patent for $240,000 with a 10-year useful life on January 1. Assuming no impairments, what is the total amortization expense Parent Co. should report for these assets in its Year 1 income statement?

A company spent $1,000,000 on a highly successful advertising campaign, which significantly increased the public recognition and value of its primary brand name. The company also spent $300,000 on an employee training program that created a uniquely skilled workforce. What amount should be recognized as intangible assets on the balance sheet as a direct result of these expenditures?

On July 1, Year 1, a publishing company purchased a copyright for $120,000. The copyright has a remaining legal life of 50 years, but the company estimates that its useful economic life is only 10 years. The company's fiscal year ends on December 31. What is the amortization expense for the copyright for the year ended December 31, Year 1?

In its first year, a new corporation incurred $15,000 in legal fees for drafting the corporate charter and bylaws, $5,000 in fees paid to the state for incorporation, and $20,000 for the costs of a market study conducted before operations began. What total amount should the corporation capitalize as an intangible asset from these activities?

On December 31, Year 1, a company determined that one of its patents was impaired. The patent had an original cost of $500,000 and accumulated amortization of $200,000. Its fair value was determined to be $150,000, and it had a remaining useful life of 5 years. After recognizing the impairment loss, what is the amortization expense for the patent for Year 2?