COLEGIO DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

BUSINESS POLICY AND STRATEGY

First Semester, AY 2018-2019
Quiz – Intangibles

I. Write legibly. Limit your answers to four sentences.

1. What are the two conditions for the recognition of an intangible asset?

2. Explain the impairment of goodwill under PAS 38.

3. Explain the accounting for development cost. When is development cost charged to expense and
when is it capitalized?

4. Different the following intangible assets:

a. Patent
b. Copyright
c. Trademark
d. Franchise
e. Goodwill

II. Encircle the BEST answer. No erasures on final answers.

1. Which of the following note disclosure is not required by PAS 38 – Intangible Assets?
a. Useful lives of the intangible assets.
b. Reconciliation of the carrying amount at the beginning and end of the year.
c. Contractual commitments for the acquisition of intangible assets.
d. Fair value of similar intangible assets used by competitors.

2. Which of the following items would qualify as an intangible asset?

a. Advertising and promotion on the launch of a huge product.
b. College tuition fees paid to employees who decide to enroll in an executive M.B.A program at
Harvard University while working with the entity.
c. Operating losses during the initial stages of the project.
d. Legal costs paid to intellectual property lawyers to register a patent.

3.Which of the following is not one of the criteria which must be met before development costs can be
capitalized?
a. The entity has sufficient financial resources to complete the project.
b. The entity intends to complete the project and either use or sell the intangible asset.
c. The entity can reliably identify the research costs incurred to bring the project to economic
feasibility.
d. The project has achieved technical feasibility.

5.The following might be considered in determining an intangible asset’s useful life, except
a. Product life cycle for the asset

bps/1801/ia/ scs Page 1

b. Whether the intangible asset is purchased or internally generated
c. Legal limits on the use of the asset
d. Period of control over the asset

6.Even if there is no indication of impairment an entity shall test for impairment:

I. An intangible asset with an indefinite useful life
II. An intangible asset not yet available for use
III. A CGU to which goodwill has been allocated
a. I and II
b. II and III
c. I and III
d. I, II and III

7.Which statement is/are FALSE

Statement I: if an entity cannot distinguish the research phase from the development phase, costs are
expensed as incurred.
Statement II: an in-process research and development project acquired in a business combination is
recognized as an asset, if it meets the definition of an asset and its fair value can be measured reliably.
a. I only
b. II only
c. Both are true
d. Both are false

8. Which is incorrect concerning the recognition and measurement of an intangible asset?

a. If an intangible asset is acquired separately, the cost comprises its purchase price, including
import duties and taxes and any directly attributable expenditure of preparing the asset for
its intended use.
b. If an intangible asset is acquired in a business combination that is an acquisition, the cost is
based on its fair value at the date of acquisition.
c. If an intangible asset is acquired free of charge or by way of government grant, the cost is
equal to its fair value.
d. If payment for an intangible asset is deferred beyond normal credit terms, its cost is equal to the
total payments over the credit period.

9. Exploration and evaluation expenditures are incurred

a. When searching for an area that may warrant detailed exploration even though the entity has not yet
obtained the legal rights to explore a specific area.
b. When the legal rights to explore an area have been obtained but the technical feasibility and
commercial viability of extracting a mineral resource are not yet demonstrable.
c. When preparations for commercial extraction are being made.
d. In extracting mineral resource and processing the resource to make it marketable.

10. Exploration and evaluation asset shall be classified as either tangible or intangible asset and
measured initially at cost and subsequently at
a. Cost model
b. Revaluation model
c. Cost model or the revaluation model
d. Cost model or fair value model

11. Depletion expense

a. Is usually part of cost of goods sold.
b. Includes tangible equipment cost in the depletion base.
c. Excludes intangible development cost from the depletion base.
d. Excludes restoration cost from the depletion base.

12. Which of the following is not part of depletable cost?

a. Acquisition cost of the mineral resource deposit
b. Exploration cost

bps/1801/ia/ scs Page 2

c. Tangible equipment cost associated with machinery used to extract the mineral resource
d. Intangible development cost such as drilling, tunnel and shaft

13. Which of following is not a similarity in the treatment for depreciation and depletion?
a. The estimated life is based on economic or productive life.
b. Assets are reported in the same classification in the statement of financial position.
c. The rate may be changed upon revision of the estimated productive life.
d. Both depreciation and depletion are based on time.

14.Which of the following must be met for an item to be recognized as an intangible asset other than
goodwill?
a. The fair value can be measured reliably.
b. The item is part of an activity aimed at gaining new scientific or technical knowledge.
c. The item is expected to be used in the production or supply of goods or services.
d. The item is identifiable and lacks physical substances

15. An entity that acquired an intangible asset may use the revaluation model for subsequent
measurement only when
a. The useful life of the intangible asset can be reliably determined.
b. An active market exists for the intangible asset.
c. The cost of the intangible asset can be measured reliably.
d. The intangible asset is a monetary asset.

16. Under current accounting practice, intangible assets are classified as

a. Amortizable or unamortizable.
b. Limited life or indefinite life.
c. Specifically identifiable or goodwill type.
d. Legally restricted or goodwill type.

17. The major problem of accounting for intangible asset is determining

a. Fair value
b. Separability
c. Residual value
d. Useful life

18. Which disclosure is not required with respect to intangible assets?

a. Useful life of the intangible asset
b. Reconciliation of carrying amount at the beginning and the end of the year
c. Contractual commitment for the acquisition of intangible asset
d. Fair value of similar intangible asset used by the competitor

19. Which statement is true in relation to internally generated intangible asset?

a. Internally generated brand, masthead, publishing title, and customer list shall not be recognized as
an intangible asset.
b. The cost of internally generated intangible asset comprises all directly attributable costs necessary to
produce and prepare the asset for the intended use.
c. Internally generated goodwill shall not be recognized as an intangible asset.
d. All of these statements are true.

20. Which statement is incorrect in relation to trademark?

a. A trademark can be regarded as an intangible asset with an indefinite useful life considering the
almost automatic renewal of the legal life.
b. A trademark is an identifiable intangible asset.
c. A trademark with indefinite useful life is not amortized but tested for impairment at least annually
and whenever there is an indication of impairment.
d. A trademark with indefinite useful life is amortized and tested for impairment whenever there is an
indication of impairment at the end of reporting period.
---END ---

bps/1801/ia/ scs Page 3