Question :
31) Godert Pharmaceutical Company has many scientists working in their : 1230216
31) Godert Pharmaceutical Company has many scientists working in their labs trying to develop an anti-aging drug. The cost of this research and development must be:
A) expensed as incurred.
B) set up as an intangible asset and amortized over 20 years.
C) set up as an intangible and tested for impairment on a yearly basis
D) not be handled in any of the above ways.
32) Research and development costs incurred by a company should be:
A) capitalized and depreciated over a period not to exceed 20 years.
B) capitalized and amortized over the useful life of the asset.
C) either capitalized and depreciated or expensed immediately at the option of the accountant.
D) expensed on the current year’s income statement.
33) A distinctive identification of a product or a service is a:
A) patent.
B) trademark.
C) copyright.
D) license.
34) Needles Company purchased Boston Company on August 31, 2010. Needles recorded goodwill in the purchase of Boston and has determined that the Boston goodwill will have an indefinite life. How will Needles account for the Boston goodwill in future accounting periods?
A) Needles will amortize the Boston goodwill over a 50-year life.
B) If the value of the Boston goodwill increases in subsequent years, Needles will increase the value in the Boston goodwill account.
C) If the value of the Boston goodwill decreases in subsequent years, Needles will decrease the value in the Boston goodwill account.
D) Needles is not allowed to change the value of the Boston goodwill account regardless of any future increase or decrease in the value of Boston goodwill.
35) On June 5, 2012, Cheap Oil Company purchased an oil well for $650,000. The well contains an estimated 162,500 barrels of oil, with an estimated residual value of zero. During 2012, 32,500 barrels of oil were removed from the well. To record depletion for 2012, Cheap Oil Company will debit Depletion Expense for:
A) $ 65,000.
B) $100,000.
C) $108,500.
D) $130,000.
36) Coal Factory, Inc., acquired a coal mine for $8,500,000 in 2011. Geologists estimate the deposit contains 2,125,000 tons of coal. Once the coal is mined, the asset will have no residual value. During 2011 and 2012, Coal Factory, Inc. mined 316,410 tons and 406,512 tons of coal, respectively. The balance in the intangible asset account for the coal on December 31, 2012, will be:
A) $2,891,688.
B) $4,885,390.
C) $5,608,312.
D) $8,500,000.
37) ABC Corporation acquired a patent for $600,000. Patent have a legal life of 20 years. Because of changing technology, this patent is expected to generate revenue for only 8 years and have no residual value. The annual amortization expense for the patent is:
A) $0.
B) $30,000.
C) $50,000.
D) $75,000.
38) In 2012, First Company purchased Second Company for $16,000,000 cash. At the time of purchase Second Company had $18,500,000 in assets and liabilities of $11,000,000. The 2012 balance sheet for First Company should show goodwill of:
A) $0.
B) $3,500,000.
C) $8,500,000.
D) $10,000,000.
39) Plenty of Oil, Inc. purchased an oil field that is estimated to have 15,000,000 barrels of oil for $45 million in 2011. In 2011 and 2012, 1,800,000 barrels and 2,605,300 of oil, respectively were extracted. The oil field will have no residual value.
40) The Best Diamond Company purchased mineral rights on a diamond mine in 2012 for a price of $7,000,000. In addition to the purchase price, the Best Diamond Company paid $100,000 for a geological survey and $20,000 for a license fee to the country where the mine is located. It is estimated that there will be no residual value when fully depleted. During the first year of mining, Best Diamond extracted 50,000 carats of diamonds and in 2013, the company extracted 250, 000 carats of diamonds. It is estimated that the mine contains 1,000,000 carats of diamonds.
Make the journal entry to:
1. Record the purchase of the mine.
2. Record depletion for 2012.
3. Record depletion for 2013.
