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What amount of impairment loss will parton recognize on the intangible asset?

by | Nov 12, 2022 | Business and Management | 0 comments

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Jones Company acquires all of the net assets of Smith Company by paying cash of $200,000. Immediately before the combination, the identifiable assets of Smith Company had a book value of $170,000 and a fair value of $180,000. The assets cost Smith $190,000. The identifiable assets of Jones Company do not qualify for an exception to the recognition and measurement principles of Topic 805, . Assuming that Smith Company has no liabilities and that the combination is accounted for under the acquisition method, Jones Company should record the identifiable assets acquired from Smith Company at ______.
A $170,000
B $180,000
C $190,000
D $500,000
Question 2
Topic 805, applies to which of the following?
A A business combination
B A combination between entities under common control
C Acquisition of an asset
D Joint ventures
Question 3
Topic 805, requires the application of the acquisition method to account for a business combination. Application of the acquisition method does not require which of the following?
A Determination of the acquisition date
B Identification of the acquirer
C Recognition and measurement of goodwill or a gain from a bargain purchase
D The book value of the assets acquired from the acquiree
Question 4
The acquisition date is the date on which the acquirer obtains control of the acquiree. It typically is the:
A closing date.
B date on which the acquiree was incorporated.
C date on which the major terms are agreed.
D date the acquirer entered into a formal plan to acquire the acquiree.
Question 5
Topic 805, establishes general recognition and measurement principles that should be applied to the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests at their acquisition-date fair values. The FASB provides for certain exceptions to the general recognition and measurement principles. Which of the following are not included in these exceptions?
A Employee benefits
B Income taxes accounted for under Topic 740,
C Indemnification assets
D Long-lived assets acquired for use
Question 6
Topic 805, establishes general recognition and measurement principles that should be applied to the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests at their acquisition-date fair values. The FASB provides for certain exceptions to the general recognition and measurement principles. Which of the following are not included in these exceptions?
A Deferred tax assets
B Inventory held for sale
C Reacquired rights
D Share-based payment awards
Question 7
Topic 805, establishes as a general principle the position that the acquirer should measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests at their:
A acquisition-date book values.
B acquisition-date fair values.
C book values on the earlier of the acquisition date or the date on which the acquisition was agreed to in principle.
D fair values on the earlier of the acquisition date or the date on which the acquisition was agreed to in principle.
Question 8
Which of the following statements must be true for an intangible asset to be recognized separately from goodwill?
A The intangible asset must meet either the contractual test or the separability test.
B It must have arisen from a business combination.
C The intangible asset must be amortizable under Topic 350.
D The intangible asset must be physical separate.
Question 9
Which of the following intangible assets do not meet the contractual test?
A Customer lists
B Internet domain names
C Secret formulas
D Trademarks
Question 10
Which of the following intangible assets meet the contractual test?
A Construction permits
B Databases
C Marketable securities
D Unpatented technology
Question 11
Which of the following intangible assets meet the separability test rather than the contractual test?
A Databases
B Franchise agreements
C Noncompetitive agreements
D Lease agreements
Question 12
Company P acquires Company S in a business combination accounted for under the acquisition method. Which of the following should not be charged to expense in the period incurred in relation to the business combination?
A Accounting fees
B Costs of maintaining a mergers and acquisitions department
C Costs of registering and issuing equity securities
D Finder’s fees
Question 13
Park Company acquires 100% of the outstanding common stock of Bench Company for $150,000 cash.
Additional facts are as follows:
1. Identifiable assets acquired, measured under Topic 805: $140,000
2. Liabilities assumed, measured under Topic 805: $40,000
3. Assume that all of the identifiable assets acquired and liabilities assumed would be measured at fair value under Topic 805; none of them qualify for any exceptions to the recognition or measurement principles
The amount of goodwill that should be recognized in this business combination is ______.
A $10,000
B $100,000
C $150,000
D $50,000
Question 14
Spartan Company acquires 80% of the outstanding common stock of Buckeye Company for $320,000 cash.
Additional facts are as follows:
1. Identifiable assets acquired, measured under Topic 805: $370,000
2. Liabilities assumed, measured under Topic 805: $60,000
3. Assume that all of the identifiable assets acquired and liabilities assumed would be measured at fair value under Topic 805; none of them qualify for any exceptions to the recognition or measurement principles
4. Fair value of NCI: $80,000
The amount of goodwill that should be recognized in this business combination is ______.
A $0
B $320,000
C $50,000
D $90,000
Question 15
Bruin Company acquires 100% of the net assets of Volunteer Company for $250,000 cash. Volunteer Company ceases to exist after Bruin acquires all of its net assets.
Additional facts are as follows:
1. Identifiable assets acquired, measured under Topic 805: $400,000
2. Liabilities assumed, measured under Topic 805: $100,000
3. Assume that all of the identifiable assets acquired and liabilities assumed would be measured at fair value under Topic 805; none of them qualify for any exceptions to the recognition or measurement principles
Bruin Company should recognize:
A a gain of $150,000.
B a gain of 50,000.
C goodwill of $150,000.
D goodwill of $50,000.
Question 16
Aztec Company acquires 100% of the net assets of Trojan Company for $800,000 cash. Trojan Company ceases to exist after Aztec acquires all of its net assets.
Additional facts are as follows:
1. Identifiable assets acquired, measured under Topic 805: $1.1 million
2. Liabilities assumed, measured under Topic 805: $200,000
3. Assume that all of the identifiable assets acquired and liabilities assumed would be measured at fair value under Topic 805; none of them qualify for any exceptions to the recognition or measurement principles
Aztec Company should recognize a gain associated with the bargain purchase of ______.
A $0
B $100,000
C $300,000
D $800,000
Question 17
Acquisition-related costs associated with a business combination should be accounted for by:
A amortizing them over a minimum period of five years.
B capitalizing them as part of the cost of the acquiree.
C expensing them in the period in which they are incurred.
D recognizing them as a valuation allowance.
Question 18
Which of the following describes the useful life of an intangible asset?
A The legal life given to the intangible asset
B The time over which the entity expects the intangible asset to contribute to future cash flows
C The time over which the entity expects to own or control the intangible asset
D The time that it would take the entity to internally develop an intangible asset that would provide similar benefits
Question 19
Which of the following statements about the amortization of an intangible asset with an indefinite life is true?
A An intangible asset with an indefinite life is amortized a maximum of 20 years.
B An intangible asset with an indefinite life is amortized a maximum of 40 years.
C An intangible asset with an indefinite life is amortized an arbitrary period of time selected by management.
D An intangible asset with an indefinite life is not amortized.
Question 20
How does an entity account for a revision in the useful life of an intangible asset?
A As a correction of an error
B As a prior-period adjustment
C Prospectively
D Retroactively
Question 21
When an intangible asset has an indefinite life, which of the following statements is true?
A The intangible asset has no foreseeable limit on the time over which it is expected to contribute to the cash flows of the entity.
B The intangible asset is based on legal rights that are conveyed in perpetuity.
C The intangible asset is expected to contribute to the cash flows of the entity for more than 40 years.
D The life is infinite.
Question 22
Goodwill must be tested for impairment during an interim period in which of the following situations?
A An event occurs or circumstances change that could possibly increase the fair value of a reporting unit.
B An event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
C An event occurs or circumstances change that would probably increase the fair value of a reporting unit above its carrying value.
D An event occurs or circumstances change that would reduce the fair value of a reporting unit below its prior-year fair value.
Question 23
An entity with a September 30 year-end has a reporting unit X. The fair value measurement of the reporting unit:
A may be made at any time during the fiscal year provided the same measurement date is used for no more than five consecutive years.
B may be made at any time during the fiscal year provided the same measurement date is used from year to year.
C must be made on September 30.
D must occur within 30 days of the year-end.
Question 24
A reporting unit reports the following information for the years ended December 31, 20X0 and 20X1:
December 31, 20X0 December 31, 20X1
Goodwill $ 500,000 $ 500,000
Carrying value of the reporting unit $6,500,000 $6,200,000
Fair market value of the reporting unit $6,700,000 $5,500,000
What is the amount of the goodwill impairment loss recognized for 20X0?
A $0
B $200,000
C $500,000
D $300,000
Question 25
A reporting unit reports the following information for the years ended December 31, 20X0 and 20X1:
December 31, 20X0 December 31, 20X1
Goodwill $ 500,000 $ 500,000
Carrying value of the reporting unit $6,500,000 $6,200,000
Fair market value of the reporting unit $6,700,000 $5,500,000
What is the amount of the goodwill impairment loss recognized for 20X1?
A $0
B $300,000
C $500,000
D $700,000
Question 26
Donovan Corporation has a reporting unit with a carrying amount of $2.8 million and a fair value of $2 million. Goodwill has a carrying amount of $750,000, what is the amount of the goodwill impairment loss?
A $0
B $450,000
C $500,000
D $750,000
Question 27
Red Bird, Inc., is disposing of a reporting unit. The reporting unit’s net assets have a carrying amount of $700,000, excluding goodwill. The reporting unit has goodwill with a carrying amount of $90,000. What is the amount of the gain Red Bird recognizes if it sells the reporting unit for $820,000?
A $120,000
B $210,000
C $30,000
D $43,200
Question 28
When must recognized intangible assets other than goodwill that are subject to amortization be reviewed for impairment?
A Annually
B Every interim period
C Whenever an entity provides a set of financial statements that reports both financial position and results of operations
D Whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable
Question 29
BEM Company has an intangible asset with an indefinite life . At the end of the current fiscal year, the intangible asset has a carrying amount of $250,000 and a fair value of $225,000. The intangible asset is expected to produce an annual cash flow of $12,000 indefinitely. What amount of impairment loss should BEM recognize on the intangible asset?
A $0
B $25,000
C $150,000
D $175,000
Question 30
Parton Corporation has an amortizable intangible asset that events and circumstances occurring during the past year indicate may be impaired. The intangible asset has a carrying amount of $300,000 and a remaining useful life of five years. The fair value of the intangible asset is $250,000. The asset is expected to produce a net cash inflow of $45,000 per year with no residual value at disposal. What amount of impairment loss will Parton recognize on the intangible asset?
A $0
B $25,000
C $50,000
D $75,000
Question 31
Lozano Company has an intangible asset with an indefinite life . At the end of the current fiscal year, the intangible asset has a carrying amount of $250,000 and a fair value of $300,000. The intangible asset is expected to produce an annual cash flow of $10,000 indefinitely. What amount of impairment loss should Lozano recognize on the intangible asset?
A $0
B $50,000
C $10,000
D $240,000
Question 32
Hunter Corporation has an amortizable intangible asset with a carrying amount of $300,000, a fair value of $275,000, and a remaining useful life of ten years. The asset is expected to produce a net cash inflow of $25,000 per year and a $10,000 salvage value at disposal. What amount should Hunter recognize as an impairment loss for the current fiscal year?
A $0
B $25,000
C $40,000
D $15,000
Question 33
Which of the following is a required note disclosure for intangible assets acquired in a material business combination?
A The fair value of the noncontrolling interest in the intangible assets at the acquisition date
B The amount of any significant residual value
C The amount of research and development assets sold during the period
D The book value of the equity interest issued
Question 34
Which of the following is not a required note disclosure for a public company when a series of immaterial individual business combinations entered into during the current year is material in the aggregate?
A The acquisition-date fair value of the total consideration transferred
B The amounts of revenue and earnings of the acquiree since the acquisition date included in the consolidated income statement for the reporting period
C Nature and description of the acquirees
D The total amount of acquired assets the entity expects to dispose of in the next year
Question 35
Which of the following is a required disclosure for intangible assets in periods subsequent to acquisition?
A Aggregate amortization for the period
B Estimated aggregate amortization expense for each of the 10 succeeding years
C Estimated fair value of each intangible asset for each of the 5 succeeding years
D Net carrying amount of each individual intangible asset
Question 36
If an entity recognizes a goodwill impairment loss in the current period, which of the following disclosures need not appear in the notes to the financial statements concerning the goodwill impairment loss?
A A description of the facts and circumstances that led to the impairment
B The amount of the impairment loss
C The fair value of the entity
D The method of determining the fair value of the reporting unit
Question 37
A company has goodwill with a book value of $100,000 and an implied fair value of $150,000. Other intangible assets total $200,000. What amounts should the company present on its balance sheet?
A Goodwill $0; other intangible assets $200,000
B Goodwill $100,000; other intangible assets $200,000
C Goodwill $150,000; other intangible assets $200,000
D Intangible assets $300,000
Question 38
In the usual case, what percentage of the voting stock must an entity directly or indirectly control for it to be required to include the investee in its consolidated financial statements?
A 100 percent
B At least 10 percent
C At least 20 percent
D Greater than 50 percent
Question 39
A company has two tangible assets—customer lists and trademarks. The company presents both assets as separate items on the balance sheet. The company amortizes the customer list but does not present the amount separately on the income statement. It does not amortize the trademark. Which of the following statements regarding the company’s presentation of these items is correct?
A The company cannot amortize one intangible asset and not the other.
B The company must disclose the amount of amortization expense in the notes if it is not presented on the face of the income statement.
C The company must present amortization on the income statement or have a modification from GAAP.
D The company should not present other intangible assets as separate line items.

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