101. Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2018. The book value of Haeger Company’s net assets, as reflected on its December 31, 2017 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2017 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?
a. $ -0-
b. $540,000
c. $360,000
d. $225,000
102. General Products Company bought Special Products Division in 2017 and appropriately recorded $750,000 of goodwill related to the purchase. On December 31, 2018, the fair value of Special Products Division is $6,000,000 and it is carried on General Product’s books for a total of $5,100,000, including the goodwill. An analysis of Special Products Division’s assets indicates that goodwill of $600,000 exists on December 31, 2018. What goodwill impairment should be recognized by General Products in 2018?
a. $0.
b. $300,000.
c. $75,000.
d. $450,000.
103. During 2018, Bond Company purchased the net assets of May Corporation for $2,200,000. On the date of the transaction, May had $600,000 of liabilities. The fair value of May's assets when acquired were as follows:
Current assets $ 1,080,000
Noncurrent assets 2,520,000
$3,600,000
How should the $800,000 difference between the fair value of the net assets acquired ($3,000,000) and the cost ($2,200,000) be accounted for by Bond?
a. The $800,000 difference should be credited to retained earnings.
b. The $800,000 difference should be recognized as a gain.
c. The current assets should be recorded at $1,080,000 and the noncurrent assets should be recorded at $1,720,000.
d. A deferred credit of $800,000 should be set up and then amortized to income over a period not to exceed forty years.
104. Dennis Company purchases Miles Company for $5,000,000 cash on January 1, 2018. The book value of Miles Company's net assets reported on its December 31, 2017 financial statement was $3,600,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. Determine the fair value of identifiable net assets used to record goodwill.
a. $280,000.
b. $4,520,000.
c. $4,200,000.
d. $3,600,000.
105. Dennis Company purchases Miles Company for $4,200,000 cash on January 1, 2018. The book value of Miles Company's net assets reported on its December 31, 2017 financial statement was $3,600,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. What amount of gain or goodwill is recognized by Dennis?
a. $920,000 gain.
b. $600,000 goodwill.
c. $320,000 gain.
d. $320,000 goodwill.
106. The following information is available for Barkley Company’s patents:
Cost $3,440,000
Carrying amount 1,920,000
Expected future net cash flows 1,600,000
Fair value 1,300,000
Barkley would record a loss on impairment of
a. $ 320,000.
b. $ 620,000.
c. $1,920,000.
d. $1,840,000.
107. Harrel Company acquired a patent on an oil extraction technique on January 1, 2017 for $7,500,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $900,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel’s market interest rate, is $4,200,000. At what amount should the patent be carried on the December 31, 2018 balance sheet?
a. $7,500,000
b. $7,200,000
c. $6,000,000
d. $4,200,000
108. Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2017 for $5,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $400,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom’s market interest rate, is $2,400,000. At what amount should the patent be carried on the December 31, 2018 balance sheet?
a. $5,000,000
b. $4,000,000
c. $3,200,000
d. $2,400,000
109. Twilight Corporation acquired End-of-the-World Products on January 1, 2017 for $6,400,000, and recorded goodwill of $1,200,000 as a result of that purchase. At December 31, 2018, the End-of-the-World Products Division had a fair value of $5,440,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $4,740,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2018?
a. $ -0-
b. $500,000
c. $460,000
d. $960,000
110. Jenks Corporation acquired Linebrink Products on January 1, 2018 for $8,000,000, and
recorded goodwill of $1,700,000 as a result of that purchase. At December 31, 2018, Linebrink Products had a fair value of $6,800,000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $5,800,000 at that time. What amount of loss on impairment of goodwill should Jenks record in 2018?
a. $ -0-
b. $700,000
c. $500,000
d. $1,200,000
111. Platteville Corporation has the following account balances at 12/31/18:
Amortization expense $ 20,000
Goodwill 280,000
Patent, net of $60,000 amortization 160,000
What amount should Platteville report for intangible assets on the 12/31/18 balance sheet?
a. $160,000
b. $220,000
c. $440,000
d. $460,000
112. Hall Co. incurred research and development costs in 2018 as follows:
Materials used in research and development projects $ 950,000
Equipment acquired that will have alternate future uses in future research
and development projects 3,000,000
Depreciation for 2018 on above equipment 500,000
Personnel costs of persons involved in research and development projects 750,000
Consulting fees paid to outsiders for research and development projects 300,000
Indirect costs reasonably allocable to research and development projects 225,000
$5,725,000
The amount of research and development costs charged to Hall's 2018 income statement should be
a. $2,000,000.
b. $2,200,000.
c. $2,725,000.
d. $5,000,000.
113. Loazia Inc. incurred the following costs during the year ended December 31, 2018:
Laboratory research aimed at discovery of new knowledge $270,000
Costs of testing prototype and design modifications 75,000
Quality control during commercial production, including routine testing
of products 270,000
Construction of research facilities having an estimated useful life of
6 years but no alternative future use 360,000
The total amount to be classified and expensed as research and development in 2018 is
a. $675,000.
b. $975,000.
c. $705,000.
d. $405,000.
114. MaBelle Corporation incurred the following costs in 2018:
Acquisition of R&D equipment with a useful life of
4 years in R&D projects $800,000
Start-up costs incurred when opening a new plant 140,000
Advertising expense to introduce a new product 700,000
Engineering costs incurred to advance a product to full
production stage 600,000
What amount should MaBelle record as research & development expense in 2018?
a. $ 800,000
b. $1,040,000
c. $1,400,000
d. $1,540,000
115. Leeper Corporation incurred the following costs in 2018:
Acquisition of R&D equipment with a useful life of
4 years in R&D projects $900,000
Cost of making minor modifications to an existing product 140,000
Advertising expense to introduce a new product 700,000
Engineering costs incurred to advance a product to full
production stage 800,000
What amount should Leeper record as research & development expense in 2018?
a. $1,025,000
b. $1,090,000
c. $1,500,000
d. $1,790,000
116. In 2017, Edwards Corporation incurred research and development costs as follows:
Materials and equipment $ 110,000
Personnel 130,000
Indirect costs 170,000
$ 410,000
These costs relate to a product that will be marketed in 2018. It is estimated that these costs will be recouped by December 31, 2020. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2017?
a. $0.
b. $280,000.
c. $300,000.
d. $410,000.
MULTIPLE CHOICE—CPA Adapted
117. Lopez Corp. incurred $840,000 of research and development costs to develop a product for which a patent was granted on January 2, 2015. Legal fees and other costs associated with registration of the patent totaled $160,000. On March 31, 2018, Lopez paid $350,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2018 should be
a. $510,000.
b. $1,000,000.
c. $1,190,000.
d. $1,350,000.
118. On June 30, 2018, Cey, Inc. exchanged 6,000 shares of Seely Corp. $30 par value common stock for a patent owned by Gore Co. The Seely stock was acquired in 2018 at a cost of $165,000. At the exchange date, Seely common stock had a fair value of $48 per share, and the patent had a net carrying value of $310,000 on Gore's books. Cey should record the patent at
a. $165,000.
b. $180,000.
c. $288,000.
d. $310,000.
119. On May 5, 2018, MacDougal Corp. exchanged 4,000 shares of its $25 par value treasury
common stock for a patent owned by Masset Co. The treasury shares were acquired in 2017 for $90,000. At May 5, 2018, MacDougal's common stock was quoted at $36 per share, and the patent had a carrying value of $115,000 on Masset's books. MacDougal should record the patent at
a. $90,000.
b. $100,000.
c. $115,000.
d. $144,000.
120. Ely Co. bought a patent from Baden Corp. on January 1, 2018, for $900,000. An independent consultant retained by Ely estimated that the remaining useful life at January 1, 2018 is 15 years. Its unamortized cost on Baden’s accounting records was $450,000; the patent had been amortized for 5 years by Baden. How much should be amortized for the year ended December 31, 2018 by Ely Co.?
a. $0.
b. $45,000.
c. $60,000.
d. $90,000.
121. January 2, 2015, Koll, Inc. purchased a patent for a new consumer product for $800,000. At the time of purchase, the patent was valid for 15 years; however, the patent’s useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2018, the product was permanently withdrawn from the market under governmental order because of a potential health hazard in the product. What amount should Koll charge against income during 2018, assuming amortization is recorded at the end of each year?
a. $ 80,000
b. $480,000
c. $560,000
d. $640,000
122. On January 1, 2014, Russell Company purchased a copyright for $2,500,000, having an estimated useful life of 16 years. In January 2018, Russell paid $375,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for the year ended December 31, 2018, should be
a. $0.
b. $156,250.
c. $179,686.
d. $187,500.
123. Which of the following legal fees should be capitalized?
Legal fees to Legal fees to successfully
obtain a copyright defend a trademark
a. No No
b. No Yes
c. Yes Yes
d. Yes No
124. Which of the following costs of goodwill should be amortized over their estimated useful lives?
Costs of goodwill from a Costs of developing
business combination goodwill internally
a. No No
b. No Yes
c. Yes Yes
d. Yes No
125. During 2018, Leon Co. incurred the following costs:
Testing in search for process alternatives $ 380,000
Costs of marketing research for new product 250,000
Modification of the formulation of a process 560,000
Research and development services performed by Beck Corp. for Leon 475,000
In Leon's 2018 income statement, research and development expense should be
a. $560,000.
b. $1,035,000.
c. $1,415,000.
d. $1,635,000.
126. Riley Co. incurred the following costs during 2018:
Significant modification to the formulation of a chemical product $160,000
Trouble-shooting in connection with breakdowns during commercial
production 150,000
Cost of exploration of new formulas 200,000
Seasonal or other periodic design changes to existing products 185,000
Laboratory research aimed at discovery of new technology 355,000
In its income statement for the year ended December 31, 2018, Riley should report research and development expense of
a. $715,000.
b. $865,000.
c. $90,000.
d. $1,050,000.
