Question :
111.The fair market value of Lewis Company’s net identifiable assets : 1237687
111.The fair market value of Lewis Company’s net identifiable assets is $5,000,000. Martin Corporation purchases Lewis’ entire business for $5,800,000. Which of the following statements is not correct?
A. Martin Corporation paid $800,000 for goodwill generated by Lewis Company.
B. Martin feels that Lewis Company has the ability to generate earnings in excess of a normal return on net identifiable assets.
C. Martin will record amortization expense over a period not to exceed 40 years.
D. Martin Corporation will record $800,000 to goodwill, an intangible asset, which will be reported in its balance sheet.
112.The legal life of most patents is:
A. 5 years.
B. 20 years.
C. 40 years.
D. 50 years.
113.The term net identifiable assets means:
A. All assets minus all liabilities.
B. All assets except goodwill, plus all liabilities.
C. All assets except intangibles, minus all liabilities.
D. All fixed assets less liabilities.
114.All of the following may be considered intangible assets except:
A. Accounts receivable.
B. Copyrights.
C. Franchises.
D. Goodwill.
115.International standards require that goodwill:
A. Be capitalized and amortized over 20 years or less.
B. Be capitalized and amortized over 40 years or less.
C. Be capitalized and reviewed annually and its value should be adjusted if impaired.
D. Be expensed immediately.
116.Which of the following would not be amortized?
A. Goodwill.
B. Copyright.
C. Franchise fee.
D. Patent.
117.Intangible assets are assets used in business operations but which:
A. Lack physical substance.
B. Cannot be sold.
C. Have been depreciated below their estimated salvage values.
D. Cannot be specifically identified.
118.The inclusion of the intangible asset goodwill in the financial statements of a company indicates:
A. That the company has a favorable reputation with its customers.
B. A monopoly position in the industry or superior management.
C. An unbroken record of annual earnings and dividends.
D. That the company has purchased a going business at a price in excess of the fair market value of the net identifiable assets.
119.Expenditures for research and development intended to lead to new products of commercial value:
A. Should be recorded as intangible assets and amortized during the years in which benefits are expected.
B. Should be charged to expense when incurred.
C. Should be capitalized only if patents are expected to be granted.
D. Should be classified as deferred charges.
120.The basic purpose of the matching principle is to allocate the cost of an asset to expense over the years in which the asset contributes to revenue. Current accounting practice does not strictly apply this principle to expenditures for:
A. Natural resources.
B. Research and development.
C. Trademarks.
D. Equipment.
