Multiple Choice Questions
1. Which of the following is a criterion that must be met in order for an item to be recognized as an intangible asset?
a. The item's fair value can be measured reliably.
b. The item is part of the entity's activities 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 substance.
2. An entity incurs the following costs in connection with the purchase of a trademark:
Purchase price of the trademark …………………………………………….. $80,000
Nonrefundable value added tax paid on the purchase of the trademark………. 4,000
Training sales department staff on the use of the trademark………………….. 2,000
Research expenditures incurred prior to the purchase of the trademark………15,000
Legal fees to register the trademark ………………………………………….. 8,000
Salaries of personnel who negotiated the purchase of the trademark
during the period of negotiation ………………………………………………10,000
Assuming that the trademark meets the criteria for recognition as an intangible asset, at what amount should the trademark be initially measured?
a. $84,000.
b. $92,000.
c. $104,000.
d. $119,000.
3. Which of the following best describes the accounting for goodwill subsequent to initial recognition?
a. Goodwill is amortized over its expected useful life, not to exceed 20 years.
b. Goodwill is tested for impairment whenever impairment indicators are present.
c. Goodwill is tested for impairment on an annual basis.
d. Goodwill is revalued using a revaluation model.
4. An entity must adjust its financial statements for an event that occurs after the end of the reporting period if
a. The event occurs before the financial statements have been approved for issuance and it provides evidence of conditions that existed at the end of the reporting period.
b. The event occurs before the financial statements have been issued and it changes the value of an asset that existed at the end of the reporting period.
c. The event occurs before the financial statements have been audited and it changes the value of a liability that existed at the end of the reporting period.
d. The event occurs within 15 days of the end of the reporting period and it changes the level of ownership in another entity from a noncontrolling to a controlling interest.
5. In selecting an accounting policy for a transaction, which of the following is the first level within the hierarchy of guidance that should be considered?
a. The most recent pronouncements of other standard-setting bodies to the extent they do not conflict with IFRS or the IASB Framework.
b. An IASB Standard or Interpretation that specifically relates to the transaction.
c. The definitions, recognition criteria, and measurement concepts in the IASB Framework.
d. An IASB Standard or Interpretation that deals with similar and related issues.
6. An entity can justify a change in accounting policy if
a. The change will result in a reliable and more relevant presentation of the financial statements.
b. The entity encounters new transactions that are substantively different from existing or previous transactions.
c. The entity previously accounted for similar, though immaterial, transactions under an unacceptable accounting method.
d. An alternative accounting policy gives rise to a material change in current year net income.