problem1: In January, 2007, Sanford Corporation purchased a patent for a new consumer product for $1,200,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, patent was estimated to have a useful life of only ten years. During 2012 the product was permanently removed from market under government order because of a potential health hazard present in the product. What amount should Sanford charge to expense during 20012, suppose amortization is the end of each year?
[A] $120,000
[B] $80,000
[C] $800,000
[D] $600,000
problem2: The intangible assed goodwill may be;
[A] Capitalized only when created internally.
[B] Written off directly to retained earnings.
[C] Capitalized only when purchased.
[D] Capitalized either when purchased or created internally.
problem3: How should research and development costs be accounted for, according to a Financial Accounting Standards Board Statement?
[A] May be either capitalized or expensed when incurred, depending upon the materiality of the amounts involved.
[B] Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will have alternative future uses or unless contractually reimbursable.
[C] Must be capitalized when incurred and then amortized over their estimated useful lives.
[D] Must be expensed in the period incurred.
problem4: Wriglee, Company went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to;
[A] Expenses of the period
[B] Patents and amortized over the remaining useful life of the patent
[C] Patents and amortized over the legal life of the patent
[D] Legal fees and amortized over five (5) years or less
problem5: On January 1, 2003, Watts Company purchased a copyright for $600,000, having an estimated useful life of 16 years. In January 2007, Watts paid $90,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2007, should be:
[A] $43,125
[B] $45,000
[C] $0
[D] $37,500
problem6: Ely Co. bought a patent from Backo Corporation on January 1, 2007, for $180,000. An independent consultant retained by Ely estimated that the remaining useful life is 30 years. Its unamortized cost on Backo's accounting records was $90,000; the patent had been amortized for five (5) years by Backo. How much should be amortized for the year ended December 31, 2007?
[A] $6,000
[B] $12,000
[C] $0
[D] $3,000