INTANGIBLES ASSETS 9.

The costs of intangible assets acquired separately is

composed of the following items EXCEPT

• Administration and other general overhead

1. Which of the following confers exclusive right to costs
conduct business in a particular territory

• Franchise
10. Which of the following intangible assets does not
have the characteristics of exchangeability

2. Amortization of intangible assets results primarily • Copyright

from application of the

• Matching principle
11. Which of the following research and development
related costs should be capitalized and amortized over
current and future periods?
3. Under what circumstances should a company defer
and amortize cost incurred in defending a patent • Cost of testing equipment that will also be
against infringements used in another separate research and
development project scheduled to begin
• Such costs should never be capitalized next year

4. Which of the following costs is not capitalized in the 12. Which of the following principles best describes
costs of the trademarks the current method of accounting for research and
• Research and development cost development costs?

• Immediate recognition as an expense

5. In accordance with the PAS, which of the following

methods of amortization is normally not recommended 13. An exclusive right granted by the government to an
for intangible assets inventor enabling the inventor to control the
• Effective interest method manufacture, sale or other use of the invention

• Patent

6. Under PAS 38, which of these phrases is not part of

the definition of intangible assets 14. Exclusive right or privilege received by a business
• Depreciable over useful life or individual to perform certain function or use certain
products or services

• Franchise
7. An intangible asset that is acquired free of charge or
for nominal consideration by way of government grant
is recorded 15. Research expenditures
• At fair value • Are capitalized as product cost

8. The term “intangible assets” is used in accounting to 16. Internally generated goodwill
denote
• Is not recorded as an asset
• Properties without physical characteristics
that have long-term effects on a business
enterprise
17. Goodwill should be recorded in the accounting 25. One of these is not an intangible asset
records only when
• Payables
• It is acquired through the purchase of
another business entity
26. Which of the following is not a required disclosure
for intangible assets?
18. In a business combination, goodwill is defined as
the excess of cost over the • Amortization recognized during the period
• The useful life of the assets
• Fair value of assets acquired less liabilities • The amortization methods used
assumed • All the choices are required disclosures

19. What is the proper time or time period over which 27. Under the benchmark treatment, intangible assets
costs of an intangible asset with revenues fits likely should be reported in the balance sheet at
that the benefit of the asset will last for an
indeterminable but very long period of time • Cost less accumulated amortization and any
accumulated impairment loss
• Twenty years

28. Under IAS 38, there is a rebuttable presumption

20. Legal fees incurred by company in defending its that the useful life of an intangible asset is
patent rights should be expensed when the outcome of
litigation is: • Not greater than 20 years

Successful / Unsuccessful
No No 29. The method of amortization used for an intangible
asset

• Need not reflect the pattern of use of the

21. The systematic allocation of the cost of intangible asset
asset is called

• Amortization
30. Costs of producing software from the product
masters subsequent to establishing technological
22. Which of the following is not a consideration in feasibility should be
determining the useful life of an intangible asset? • Charged to expense when incurred
• Minimum amortization period prescribed
by generally accepted accounting principles
for all intangible assets 31. Farrah Inc. incurred the following cost during the
year ended December 31, 2020.
Laboratory research aimed to discover of new
23. A change in an intangible asset’s residual value knowledge P700,000
shall be treated as a
Legal work in connection with the application for a
• Change in accounting estimate
patent on a new product 350,000
Seasonal or other periodic design changes to existing
24. The cost of intangible assets acquired by way of
government grant is recorded at products 200,000

• Nominal amount/zero plus direct cost Testing for evaluation of product alternatives 550,000
• Either of choices
• Fair value
The total amount to be classified and expensed as 35. During 2020, Farida Company incurred P540,000
research and development cost for 2020 is? of research and development costs in its laboratories
developing a product for which a patent was granted
• P1,050,000 on October 22, 2020. Legal fees and other costs
related to the registration of the patent totaled P85,000.
The economic life of the patent is estimated to be 12
32. On October 1, 2020, Faucet, Inc. exchanged 30,000 years. What amount should Farida capitalize as a
shares of its ordinary shares (P10 par value) held in patent on October 22, 2020?
treasury for a copyright owned by Cabrelli Company.
The treasury shares were acquired in 2012 at a cost of • P85,000
P280,000. At the exchange date, Faucet’s ordinary
shares were quoted at P25 per share, and the copyright
had a net carrying value on Cabrelli’s books of 36. On January 2, 2020, Faye Co. bought a trademark
P300,000. Faucet should record the copyright at from Krug Co. for P1,000,000. Faye retained an
independent consultant, who estimated the trademark’s
• P705,000 remaining life to be 20 years. Its unamortized cost in
Krug’s accounting records was P760,000. Faye
decided to amortize the trademark over the maximum
33. During 2015, Fides Design Company spent period allowed. In Faye’s December 31, 2020, balance
P220,000 on research and development costs for a new sheet, what amount should be reported as accumulated
product. This product was patented January 1, 2016, at amortization?
a small cost that was expensed in 2016. The patent
had a legal life of 17 years and an estimated useful life • P50,000
of 8 years. In January 2020, Fides paid P20,000 for
legal fees in successful defense of the patent. The
amortization of the patent for 2020 should be 37. On January 2, 2018, Forest Co. purchased a patent
for a new consumer product for P90,000. At the time
• P-0- 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
34. Fryer Products, Inc incurred the following costs product. On December 31, 2020, the product was
during the year ended December 31, 2020: permanently withdrawn from sale under governmental
order because of a potential health hazard in the
product. What amount should Forest report as loss
Design, construction and testing of preproduction from obsolescence during 2020, assuming amortization
models P 90,000 is recorded at the end of each year?
Design of tools, molds, and dies involving new • P54,000
technology 150,000
Laboratory research aimed at discovery of new
knowledge 70,000 38. Fisher Company purchased a patent on January 1,
2015 for P428,400. The patent was being amortized
Quality control during commercial production, over its legal of 15 years expiring on January 1, 2030.
including testing of products 180,000 On January 1, 2018, Fisher determined that the
economic life of the patent would not last longer than
The total amount to be classified and expensed as
10 years from the date of acquisition. What amount
research and development is?
should be reported in the balance sheet as patent, net of
• P310,000 accumulated amortization on December 31, 2020?

• P195,840
39. On July 1, 2018, Flat Co. signed an agreement to 43. Feriol Manufacturing Company acquired three
operate as a franchise of Gas Co. for an initial patents in January 2011. The patents have different
franchise fee of P1,200,000. On the same date, Flat lives as indicated in the following schedule:
paid P400,000 and agreed to pay the balance in four
Remaining Remaining
equal payments of P200,000 beginning July 1, 2019.
The down payment is not refundable, and no future Cost Useful life legal life
services are required of the franchisor. Flat can
borrow at 14% for a loan of this type. If the franchise Patent A P 250,000 10 years 17 years
has definite life of 20 years, what is the carrying value Patent B 545,000 5 years 7 years
of the franchise to be reported on the December 31,
2020 balance sheet? Patent C 1,312,400 indefinite 17 years

• P 859,950
Patent C is believed to be uniquely useful as long as
the company retains the right to use it. In January
40. The general ledger of the Flyale Corporation as of 2012, the company unsuccessfully attempted to defend
December 31, includes the following accounts: its right to Patent B. Legal fees of P254,000 were
Organization costs P 40,000 incurred in this connection. The company’s policy is to
amortize intangible assets by the straight-line method
Deposit with advertising agency (will be used to the nearest half year. The company reports on a
calendar year basis
to promote goodwill) 64,000
How much is the amortization of the patents for the
Discount on bonds payable 120,000
year 2012?
Excess of cost over fair value of net
• P156,700
assets acquired subsidiary 560,000
Trademarks 96,000
44. Patent C is believed to be uniquely useful as long
In the preparation of Flyale’s balance sheet as of as the company retains the right to use it. In January
December 31, what amount should be reported as total 2012, the company unsuccessfully attempted to defend
intangible assets? its right to Patent B. Legal fees of P254,000 were
incurred in this connection. The company’s policy is to
• P656,000 amortize intangible assets by the straight-line method
to the nearest half year. The company reports on a
calendar year basis. how much is the loss from Patent
41. Formica Co. purchased a patent on January 1, 2018 B?
for P714,000. The patent was being amortized over its
remaining legal life of 15 years expiring on January • P635,500
2025. During 2020, Formic determined that the
economic benefits of the patent would not lasts longer
than 10 years from the date of acquisition. What 45. An intangible asset is acquired on January 1, 2018,
amount should be charged to patent amortization for P500,000 while it has a legal life of 15 years, due
expense for the year ended December 31, 2020? to rapidly changing technology, management estimates
a useful life of only 5 years. On January 1, 2019,
• P 81,600 management is uncertain that the process can be made
economically feasible and decides to write-down the
intangible asset to an estimated market value of
42. On January 1, 2016, Ferry Company purchased for P150,000 with no change in its remaining useful life.
P1,200,000, a trademark with an estimated useful life On January 1, 2020, having perfected the related
of 15 years. In January 2020, Ferry paid P180,000 for production process, the asset is now appraised at a
legal fees in successful defense of the trademark. sound value of P600,000. Under the revaluation
Trademark amortization expense for the year ended model, what amount should be reported in the
December 31, 2020 should be shareholder’s equity as a result of revaluation?
• P 80,000 • P300,000