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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

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M922706

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