Multiple choice:

1)Immediately after Smith, a drug company, purchased a patent for $300,000, it successfully defended the patent in court at a cost of $40,000. In addition, Smith Co. incurred $60,000 of internal costs to invent a new drug. What is the annual amortization expense for this patent (assuming amortization over its legal life)?

A. $20,000

B. $18,000

C. $17,000

D. $15,000

E. None of the above.

2. At Dec. 31 2020, Wagner Co. had $1.6 million of short-term debt due on Feb. 19, 2021. On Jan. 10, 2021, Wagner arranged for a line of credit with City Bank up to $1.2 million at 1% above prime rate, with the principal due in three years. On Feb. 2, 2020, Wagner actually borrowed $1 million from the line of credit and used the proceeds to help pay off the $1.6 million short-term debt; the rest of the short-debt was paid with cash on hand. Of the $1.6 million shortterm debt, what amount should still be reported as short-term liabilities on the Dec. 31, 2020 balance sheet, which is issued on Mar. 5, 2021?

A. $0

B. $600,000

C. $1,000,000

D. $1,600,000

E. None of the above.

3. Zhang Company, which makes electronic equipment (such as laser scanners), incurred the following costs during the year (listed in chronological order):

$90,000 to construct a research building at the start of the year. A 30-year life, with no salvage value, is assigned. Assume the straight-line method is used for any depreciation. After this year, the building will be used for projects other than laser scanners.

$22,000 for materials, labor and overhead costs incurred to develop a prototype laser scanner.

$10,000 for engineering costs incurred to advance the laser scanner up to the point where production begins.

$14,000 for trouble-shooting cost during breakdowns after commercial production has begun.

$12,000 for seasonal and other routine design changes to existing scanner products in production. On its income statement for the year, Zhang should report R&D expense related to the laser scanners of:

A. $0, as R&D is capitalized and amortized over future periods

B. $148,000

C. $122,000

D. $61,000

E. $47,000

F. $33,000

G. $32,000

H. None of the above.

Use the following information for the next two questions. Stewart Company has 30 employees who work 8-hour shifts and are paid an hourly wage. At the beginning of 2018, the company approved a program in which employees earn 10 days of paid vacation each year. Vacation may be taken at the beginning of the year after it was earned and may be carried forward indefinitely. Related information is as follows:

Year	Hourly wage	vacation days earned by each employee	vacation days taken by each employee
2018	$7.20	10	0
2019	$7.50	10	8
2020	$7.92	10	10

Year Hourly Wage Vacation days earned by each employee Vacation days taken by each employee 2018 $7.20 10 0 2019 $7.50 10 8 2020 $7.92 10 10

4. What amount of expense for compensated absences should be reported on Stewarts income statement for 2018?

A. $0

B. $16,560

C. $17,714

D. $17,880

E. None of the above.

5. What is the amount of the accrued liability for compensated absences (Vacation Payable) that should be reported at the end of 2020?

A. $19,890

B. $21,552

C. $22,608

D. $22,954

E. None of the above.