Question
1. On January 1, 20X1, Tech Entity acquired a patent for $1,000,000 with half the purchase price payable immediately and the other half payable in
1. On January 1, 20X1, Tech Entity acquired a patent for $1,000,000 with half the purchase price payable immediately and the other half payable in one year. Assume the patent meets all criteria for recognition as an intangible asset. An appropriate discount rate is 5% per year. At what amount should the patent be recorded on the books of Tech Entity?
a. $1,000,000
b. $500,000
c. $952,381
d. $976,190
e. None of the above
2. Law Entity (LE) acquires a copyright in exchange for $5,000 cash and a patent with a carrying value of $20,000 (cost $30,000) and a fair value of $25,000. This exchange has commercial substance. What is the amount of gain or loss recognized on exchange?
a. Gain of $10,000
b. Gain of $5,000
c. Loss of $10,000
d. Loss of $5,000
e. There is no gain or loss on exchange
3. Under what circumstances can internally generated goodwill be recognized?
a. When the market value of an entity exceeds
b. The brand of an entity is well-respected
c. The goodwill results from a contractural right
d. The goodwill will result in future economic benefits
e. Internally generated goodwill cannot be recognized
4. Which of the following statements is true regarding the revaluation method?
a. Revaluations are always recognized in profit and loss
b. Upward revaluations can never be recognized in profit and loss
c. Upward revaluations can be recognized in profit and loss under certain circumstances
d, Revaluations are always recognized in other comprehensive income
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